Early tax filing tips: 8 ways to make tax season less painful
In a Dolans.com survey, 34% of respondents said that they start working on their taxes in January. We applaud all of you early birds and we want to encourage the rest of you to follow suit.
Trust us, tackling tax season in bite-sized chunks will make the whole process much less daunting and save you a lot of time and headache down the road. Here are a few simple, painless tricks that can give you a big head start on your 2009 taxes now.
1. Create a system for organizing tax documents as they come in.
There is nothing worse than sitting down to do your taxes, then realizing that you have to start scouring through the house because you can't find an important document. The key is to have a system in place before the first tax document ever shows up at your house. Your system can be as unsophisticated as a large envelope or an accordion file. Just designate a spot and make sure that everyone in the house knows about it.
2. Review all tax documents as they come in.
As tax documents show up, don't just stuff them into that great new tax record keeper. Take a moment to review each document as it comes in so that you can correct discrepancies well before you start preparing your return. If there is a mistake, getting a corrected W-2 or 1099 form can take time, so don't wait until you are down to the wire.
3. Calculate whether you will have to pay back any of the "Making Work Pay" tax credit.
As part of last year's stimulus package, many American's received extra money in their paychecks. But approximately 15 million taxpayers will have to repay between $250-$400 of the tax credit they received. To avoid getting a nasty surprise when you file, use the IRS Schedule M to determine whether or not you will have to repay Uncle Sam.
4. Make sure that you know all the 2009 changes that could impact your taxes.
Every year sees new tax changes, but 2009 was especially busy. As the government tried to save the economy, tax credits and rebates were flying. Cash for Clunkers, the homebuyer's tax credit, energy rebates.... be sure that you know the 2009 tax rules so that you can take advantage of every credit and deduction possible.
5. Decide whether you are going to go it alone or hire a pro.
Thanks to our ridiculously complicated tax code even the current IRS Commissioner recently admitted that he hires tax prep help. About 60% of us have to pay a professional to help us prepare our taxes. If you are going to use a professional, make your appointment early.
If you are going to go it alone, decide whether you are going to use tax software. If so, you can get ahead of the game by purchasing your tax software now. Tax software can help you find every deduction to which you are entitled and helps you avoid common mistakes that can trip you up, such as simple math mistakes (electronic returns have 13% fewer mistakes).
6. Get your tax forms now.
If you are filing by mail and not electronically, get the tax forms you will need now. You can find commonly-used tax forms at your local library. You can also download all tax forms through the IRS's web site or have a copy mailed to you by calling the IRS at 1-800-829-3676.
7. Start gathering your tax information now.
There's no reason to wait until the heat of the battle to start organizing the tax information that you already have. Make a list of all your 2009 tax payments and tax refunds, comb through your credit card bills and checkbook to look for possible deductions, tally up charitable donations and collect all the Social Security numbers you'll need in one place.
8. Start early
There's no sense in putting off the inevitable. Use these tips to get a big of a head start on the tax season now and save yourself headache and heartache as the tax deadline looms.
As you dive into your 2009 taxes, let us share 11 overlooked tax deductions and show you how to make your tax deductions airtight.