If you’re one of the millions of Americans owed an income tax refund this year, you’ll want to file as soon as possible to get your money. Good preparation and organization are key to doing this with the least effort. To help the process go more quickly, try these steps.
Buy a file to collect all tax-related papers. Office stores carry products specifically for this purpose, with separate envelopes for income statements, deductions, government forms, etc.
By Jan. 31, your employer will send a W-2 form listing your total annual income and the taxes you paid. Expect a Form 1099 from each bank, broker, company, and fund you invested with in 2000. For easy filing, separate the different 1099 forms in their respective files: earned interest; dividends; and stock and security sales. Save the instructions accompanying these forms for use when filing.
Now, list any additional earned income from sources such as your own business, alimony, partnerships, estates or trusts, rental property income, taxable gains from selling your house, and any other source. Record these on paper listing dates received, amounts, and sources.
Next, start documenting deductions to minimize your tax liability. Mortgage interest is the largest deduction for many taxpayers. Look for the Mortgage Interest Statement (Form 1098) from your lender this month. Real estate taxes are deductible as well, so check your escrow account, mortgage statement, or a canceled check from the tax assessor to get this information.
Charitable donations also are big deductions. Compile your church statements, receipts from donations, payroll charity deductions, canceled checks to charities, even door-to-door solicitations to total your cash contributions. Collect receipts from organizations to which you donated clothing, furniture, and the like and estimate the value of the items on the receipt.
Other deductions include investment expenses such as maintenance fees and safety deposit boxes for storing your investment documents. Locate the receipts or statements showing these fees. And if medical expenses exceeded 7 1/2 percent of your income, save your bills for a medical deduction.
Even if someone else does your taxes, review the basic tax forms so you generally understand the process. Doing so might spur some ideas for additional deductions. You can download all federal forms and instructions at www.irs.gov or have them sent to you by calling 1-800-TAX-FORM.
Schedule time to complete your return. Whether using a planner or doing your taxes yourself, being organized can make it easier.