Organizing Your Tax Information

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Organizing Your Tax Information

Whether you prepare your taxes yourself, or use a tax preparation service or an accountant, you still need to organize your tax information. While that can seem like an overwhelming task, if you take your time and approach it in an organized way, it doesn’t have to be overwhelming or even take a lot of time.

Staying on top of your tax information means collecting information as it is sent to you—either via the mail or email—and placing it in an electronic or physical folder and adding information that you have to it as you approach tax time. Employers and some others must send you tax information by January 31.

Personal Information

Start with the personal information you will need, which includes your Social Security number and that of your spouse and dependents, if you have any. You’ll need last year’s tax return and your checking account and bank routing number, in case you’ll get a refund and want to have that directly deposited into your bank account.

Income Received

To determine your income for tax purposes, you need your W-2 from your employer and any 1099s you may receive from side businesses or self-employment income you have. If you receive alimony or unemployment benefits or get Social Security, you will also need those statements.

Here are some other types of income and adjustments to income that you may have:

• Investment or interest income from a bank, credit union or financial institution
• Miscellaneous income from jury duty, scholarships earned, medical savings accounts, or gambling winnings
• IRA or other retirement plan distributions
• Income from sale of a home or rental property
• Cancellation of debt—if you sold a home for less than you owed on the mortgage and the bank forgave the debt, you still owe taxes on the amount that you didn’t pay the bank.

Deductions, Adjustments and Credits

The government offers a wide variety of deductions, adjustments, and credits to offset your income. If you have enough itemized deductions, you can itemize, which involves listing specific information on Schedule A; if not, you can take the standard deduction. The standard deduction is an amount that reduces the amount that you have to pay in tax.

The only way to determine which course makes sense is to gather all the information and do the calculations yourself through tax preparation software or give it to your tax preparer to determine. There are also deductions and credits that aren’t dependent on whether you itemize or not.

Here are some of the deductions, payments, credits, and adjustments to your income that you might have that you should gather information for:

• IRA contributions
• Student loan interest paid
• Alimony paid (where applicable)
• Mortgage interest, private mortgage insurance premiums, and points paid
• Medical and dental expenses
• Child care, education and adoption expenses
• Rental property income and expenses
• Home business expenses
• State, local, real estate, and personal property taxes; and estimated taxes paid
• Energy-efficiency home improvements

Preparing Your Taxes

When preparing your taxes, it is helpful to think like a bookkeeper and take each section one step at a time. If you live in a state that has a personal income tax, you’ll also have to prepare your state taxes, and you may also have local taxes to pay as well.

Should the task seem overwhelming, break each part into steps and look at your schedule. Figure out how much you can do every weekend and back that out from the tax filing date, which is usually April 15, but might be later due to a weekend or holiday.

For example, if you have six weeks until your taxes are due, divide the federal tax form into four parts and tackle one part each weekend until you are done; then use the last weekend or two to fill in the state and local forms.