5 ways to prep for next tax season
The hassle of doing your taxes is still a very fresh memory. Use that as motivation to take a few steps now to make next year's tax preparation much less stressful.
This post comes from Craig Donofrio at partner site Money Talks News.
Now that you have this year's taxes out of the way, it's time to get a jump on April 15, 2014.
1. Keep personal information organized.
Were you scrambling to find your kid's Social Security number? Did you forget your spouse's birth date? Tracking down this information just adds more time to an already time-consuming process. Pick a safe spot to store all the info you need. Consider a fireproof and waterproof safe that's large enough to store important letter-sized documents.
What to store:
- Last year's taxes. You're going to want this year's tax returns to use as a guide for next year's, so keep them in a secure spot. If your life doesn't undergo major changes this year, filing taxes will be a breeze.
- Personal data. Keep a list of important information like Social Security numbers and birth dates for you and your family.
- Receipts. Start a receipt folder to store anything you might be able to deduct at the end of the year, such as home improvement purchases or business supplies.
2. Go digital.
If you'd rather go paperless, there are apps for that like DocVault. It lets you save 3GB worth of encrypted pictures and tax-related material like receipts and invoices, and allows you to add notes and tags to the photos for easy organization on DocVault's servers. Come tax time, you have the option of transferring those images directly to filing services TaxAct Deluxe or TaxAct Preparer's Enterprise.
Receipt Catcher is an app that lets you take a photo of a receipt, tag it with info, and then email it to yourself. When you're ready, you can print out a year's worth of receipts in a few clicks. The app costs 99 cents and is available for both Android and iPhone.
3. Start thinking about tax breaks.
Before you file those papers away, review which deductions and credits you qualified for in 2012 and determine which ones you'll be able to use this year. For example:
- Home renovations. If you're planning some home improvements, check out EnergyStar.gov's list of products that qualify for a tax credit.
- Home office deductions. I work at home, so I take advantage of all the deductions I'm allowed. Double-check and make sure your home office meets the IRS' requirements. Filing a Schedule C makes you 10 times more likely to get audited. Now is a good time to check this IRS fact sheet on what you can and can't deduct if you plan to upgrade your office.
- Other deductions. Finally, look for easy-to-miss deductions.
4. Review your documents.
Use your 2012 return to spot where you can and should save more money this year. For example:
- Mortgage rates. If you haven't already, maybe you should consider refinancing to a lower interest rate.
- Retirement savings. If you haven't put any money away for retirement, start now, even if it's just $40 a month.
5. Don't withhold too much.
Uncle Sam loves getting interest-free loans, and many taxpayers make it possible by overpaying their taxes. Last year, the average tax refund was $2,803. But there are ways to keep that money in your pocket. We have tips, like using the IRS' withholding calculator.
Take a few minutes to research what changes are in store for this year. Will the deductions and credits you used for 2012 be around for 2013? Are new deductions available? The more you know now, the easier it will be to minimize your tax liability.
More on Money Talks News and MSN Money:
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
Saving just a single month of expenses may take longer than you think. See how your savings rate affects how quickly you can build a solid emergency fund.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'