Taxes are inconvenient, unavoidable, time-consuming, and can be frustrating.And while most of us would rather be doing just about anything else, Money Talks News founder Stacy Johnson has a few ideas to help you get through filing faster this year by planning ahead.
1. Get your numbers in order
First, get everyone’s Social Security numbers. You’ll need one for everyone on your tax return: yourself, your spouse, and everyone you support (dependents), including your parents or children.
If your children don’t already have a Social Security number, get one now. Fill out the Application for a Social Security Card from the U.S. Social Security Administration website and locate your child’s birth certificate.
2. Tally your income
Next, gather any documents that show the income you earned in 2012, as well as income earned by your spouse if filing jointly. If you’ve only had one job, no problem – you just need a W2 from your employer. You can see a sample here.
If you didn’t work last year but collected unemployment, you’ll need a 1099-G. If you received interest on savings accounts, made short or long-term capital gains, collected Social Security, or received a pension, you’ll need proof of that as well, which you’ll get from other 1099 forms.
See a pattern here? Proof of income you earned comes either on a W-2 or 1099.
Pull out last year’s tax return and see what income you reported. If you had income from the same sources this year, make sure you have all forms in hand. If you don’t have all documentation by Jan. 31, call employers, clients, or bank reps and ask.
3. Find last year’s returns
As noted above, your 2011 tax return is a great guide to prepare for 2012 filing. Unless your life has changed radically, you’ll have many of the same sources of income, as well as deductions like mortgage interest, property taxes, charitable contributions, etc. Checking last year’s return is a handy reminder of what you’ll need to include this year.
If you can’t find last year’s returns, you can order a copy online through the IRS website at Order a Transcript.
4. Line up deductions
Now figure out what deductions you can claim for the year. There are loads of possibilities, but you’ll need documentation to prove anything you claim. For example:
In Tax Hacks 2012: 8 Easy-To-Miss Deductions we found some commonly overlooked deductions that can save you big, such as child care expenses.
If you paid for someone to watch your child, disabled spouse, or dependent family member while you were working, you might be able to deduct part of the cost. And then there are medical expenses: If yours exceeded 7.5 per cent of your adjusted gross income, it will lower your taxable income.
Work from home? There are home office deductions, but they come with sticky rules. Check out Tax Hacks 2012: Home Office Deductions for more details.
Other things are deductible too, like mortgage interest, business travel, and work-related education expenses. Check out the Internal Revenue Service’s Itemized Deductions site for a list. Take your time and go over it carefully. Remember, every $100 of deductible expenses can mean up to $35 in refunds.
5. Pile on the contributions
If you were charitable last year, you may have earned yourself a tax discount. Charitable donations made to legitimate organisations (no individuals or political campaigns) are deductible.
Donations can be in the form of cash, property, or stock, but the rules can be complex. Check out the IRS’s Eight Tips for Deducting Charitable Contributions for a relatively easy-to-follow set of rules.
6. Plan for your refund
Last but not least, plan for your refund. You’ll get it a lot sooner if you sign up for direct deposit. The IRS allows splitting your direct deposit into up to three different checking and savings accounts. Tax form instructions will tell you how to sign up.
Another way to speed up your refund (in about 10 days, according to the IRS), is to file electronically.
And once you have that refund in hand, do something great with it. Check out this story we did last year, Tax Hacks 2012: 7 Smart Uses for Your Tax Refund for some inspiration, like building an emergency fund, investing, or starting a business.
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