Tax Return Preparation: The Basics
You've got just more than a month left before you have to file your tax return. But tax return preparation doesn't need to be intimidating or complicated, despite the fears many people have about their taxes.
By following these simple tips, you'll learn about the basics of how to prepare your taxes. Once you decide which path to take, you'll find that even if it isn't the most fun way to spend a few hours, tax return preparation doesn't have to be the painful experience you may have expected. Here's a checklist for figuring out the best way to get your tax returns prepared efficiently.
Tip 1: Gather all your records.
The best place to start in preparing your taxes is to have all of your records ready and available. Anyone who's an employee should get a W-2 from their employer. If you have a bank or brokerage account, mutual funds, or other investments, then expect to receive a 1099 from each financial provider. These forms have all the basic information you need to complete your return, so make sure all of your accounts are ready and accounted for, and then you can move on to preparing your return. If you're missing forms, then it's usually smart to wait until they come in rather than plowing ahead, as you'll likely end up having to duplicate work once the missing form shows up.
Tip 2: Decide how to get your return prepared.
Once you have all your forms together, it's a good time to decide how to proceed. If you have a simple return with only job income, then doing your own return by hand may be perfectly viable. For more complicated tax-return preparation, specialized tax-accounting firms can give you the personalized, professional attention you need to make sure your taxes get prepared correctly. If you find yourself somewhere in between, then tax software can be a reasonable middle ground, as it often costs less than full-blown professional preparation yet has checks in place to make sure you don't miss out on lucrative potential deductions. With Intuit's TurboTax competing against H&R Block , which offers both its own software and low-cost live tax-prep, you can play the two companies against each other.
Another option is to take advantage of free tax help from the Volunteer Income Tax Assistance program. For certain low-income or elderly taxpayers, trained volunteers will help you prepare your tax return and even file your return for you when it's complete.
Tip 3: Get started on the right foot.
The IRS has a bad reputation for making everything more complicated than it needs to be, but in reality, it does an admirable job of condensing thousands of pages of legalese into usable information for taxpayers to follow. For instance, Publication 17 is a scary-thick, 292-page manual that would be just about impossible for anyone to read through. But just looking through the table of contents and index will show you where to get essential information, including which forms to file, where to get tax help, and even your rights if the IRS decides to audit your return. Moreover, with hyperlinks on the online format of the publication, you can easily get the information you need to get your tax return prepared, even if you decide to do it on your own.
Tip 4: Double-check everything.
Too often, simple mistakes get through the tax return preparation process, delaying your refund and necessitating a formal response from the IRS. If you use an accountant, mistakes usually won't be on your shoulders, and tax-preparation software does internal math checks to correct simple errors. But if you're doing your taxes by hand, taking a few extra minutes to double-check your numbers can save you from a lot of troubles down the road.
Tip 5: Decide how to file.
Once you have returns done, you have one more decision to make: how to file your prepared return. E-filing is fast and easy, and although some preparers charge you for electronic filing, the extra speed with which you get refunds on e-filed returns might be worth the cost. Moreover, some free e-filing options exist. Nevertheless, if you feel more comfortable with paper returns, just remember that you'll bear the cost of postage, and you might suffer a longer delay before you get your refund.
Get your taxes done!
Tax return preparation is scary for many people, but it shouldn't be. By following these simple steps, you can be on the path to getting your taxes done long before April 15 rolls around.
To save the most you can on your tax bill, you need solid advice with specific tips you can use. To get them, be sure to check out our Motley Fool ONE Tax Center. You'll find Fool retirement expert and financial planner Robert Brokamp's extensive report there as your free gift. With tax season winding down, this limited-time offer won't last long, so click here right now and claim this valuable tax resource today!
The article Tax Return Preparation: The Basics originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Intuit. The Motley Fool owns shares of Intuit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.