6 steps to prep for your tax return
Are you ready for tax season? Make the process smooth this year by getting the necessary documentation together now.
This post comes from Angela Colley at partner site Money Talks News.
Taxes are inconvenient, unavoidable, time-consuming and often frustrating. But even though most of us would rather be doing just about anything else, there are simple things you can do before you start that will get you through the process faster and with less stress.
Here's a quick checklist:
1. Get your numbers in order.
First, get everyone's Social Security numbers. You'll need one for everyone on your tax return: you, your spouse and everyone you support (dependents), including your children and possibly your parents.
If your child doesn't have a Social Security number, get one now. Locate your child's birth certificate and fill out an application for a Social Security card from the Social Security Administration website. You'll need to take the application, birth certificate and your child to your local Social Security office. Anyone 12 or older applying for an original Social Security number has to be interviewed in person.
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 had only one job, you'll just need a W-2 from your employer.
If you've done contract or freelance work, you'll need a 1099-MISC if you made $600 or more from any company or client.
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.
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 return.
As noted above, your 2011 tax return is a great guide to prepare for your 2012 filing. Unless your life has changed radically, you'll have many of the same sources of income, as well as deductions such as 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.
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, if you paid 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. If your medical expenses exceeded 7.5% of your adjusted gross income, that will lower your taxable income.
Other things are deductible, too, including mortgage interest, business travel and work-related education expenses. Check out the Internal Revenue Service's Itemized Deductions page for details. Go over it carefully. Remember, every $100 of deductible expenses can mean up to $35 in your refund.
Did you work from home? There are also home-office deductions, but they come with sticky rules.
5. Pile on the contributions.
If you were charitable last year, you may have earned a tax discount. Charitable donations made to legitimate organizations (not 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 this IRS article for a relatively easy-to-decipher set of rules.
6. Plan for your refund.
Figure out in advance the best way to get your refund. You'll get it a lot sooner if you use direct deposit. The IRS allows splitting your direct deposit between 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 is to file electronically. You'll get the refund in about 10 days, the IRS says.
More on Money Talks News and MSN Money:
- 8 easy-to-miss deductions
- How to deduct a home office
- 7 smart uses for a tax refund
- Look for these tax forms in the mail
- 10 tax mistakes you don't want to make
- How to save on taxes? Try a divorce
Fair general statements ----- However for 2012 you're looking at 10% of AGI not 7.5% as a floor for medical (you get to itemize all but can only deduct what's over your floor amount (and then still overall itemizations - medical, taxes, mortgage, charity, etc. have to have more than your standard deduction).
Additionally the IRS has stated that refund time is greatly increased this year due to congress (not doing their job sooner) and having to redo IRS computer systems. The hopefully incorrect time for refunds to be returned is 23 days NOT 10 (this is using Efile and direct deposit -- paper returns and mailing adds substantial time to the refund process).
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