Organize Your Files for Tax Time – Guest Post

This post by PT from PT Money. PT plans on taking over the world in 2010. He’ll start by helping you get ready to do your taxes.

Tax Time is Here

It’s tax time! Are you excited? Some people love this time of year because it means they might be getting a refund soon. Others dread it because they have to pay taxes AND pay to have their taxes filed. Double whammy! Refund checks aside, what you don’t want is to be bogged down by the process of actually getting ready to file your taxes.

A Better Approach?

The way I see it there are two approaches to filing your taxes, whether you do it yourself or you have a professional do it. You can (1) boot up your favorite tax software, get started, and go find documents as your prompted by the software, or (2) you can organize everything before hand and spend less time in front of your computer. Sure there may be a few things you didn’t think about, but you’ll get your return done a lot faster with a bit of preparation. And you’ll only have to go hunting for a few items.

In this post, I’ll try and prepare you to file your taxes quickly. Or, if you hand your information over to a CPA, I’ll have you first in line at his/her office. And you won’t be getting any calls because extra information is needed.

Which Documents You’ll Need

I try and think of the things I’ll need in terms of the order of items on the 1040 form. That has us starting with personal information. You should know all this information off the top of your head. However, if you had added a baby to the family in 2009 (like I did), you’ll need their social security number. If you don’t have one yet, or you lost it, visit: SocialSecurity.Gov.

Up next is income. Jot down a quick list of all the income sources you’ve had during the year. Did you make extra money this year? The most common items are things like:

• job income (W-2)
• contract income (1099 forms, for all you freelancers)
• interest income (for you big savers)
• investing and dividend income
• alimony
• rental property income
• tax refunds from the State and Local Govs
• unemployment income
• other business income
• social security income

Your employer, or anyone else you made more than $600 with in 2009, is required to send you a form by January 31, 2010 detailing how much you earned. If you didn’t receive that form, you may need to complete a Form 4852 as a substitute W-2.

Next are the above-the-line deductions and credits. Love these guys. Here’s a few of the more common:

• settlement statement for the home buyer credit
• year-end account summary showing IRA contributions
• receipts for any green energy additions (insulation, windows, etc.)
• form 1098-E showing interest paid for student loans
• payment documentation for:
• self-employed insurance
• self-employed retirement/pension plans
• moving expenses
• alimony paid
• educator expenses (up to $250)

Next, you’ll need information about other credits and itemized deductions (if you’re not taking the standard deduction). More common items are:

• statement showing mortgage interest paid
• receipts showing property taxes paid
• documentation for charitable contributions
• sales tax info for new cars
• receipts for education costs (Form 1098-T)
• child-care expenses

Check out this huge list of 2009 tax deductions (and credits) for more.

Another big area to get organized for is your business expenses for the Schedule C. This one always trips me up. If you use Quickbooks, Quicken Home and Business, or some other service, this will be easy for you. If you didn’t do this for 2009, I’ve found that the best way to go back and find these expenses is to print out the statements from your online banking account. A quick run down those items will jog your memory for all your major expenses.

Lastly, you’ll need your banking information to have your refund direct deposited (quickest way to get your refund). The IRS needs your bank account number and routing number of the bank.

Preparing for Next Year’s Taxes

If you find yourself frustrated at the lack of preparation this year, here are some steps to have you more ready for filing your 2010 return:

• Use a tool like Quicken to separate your personal and business expenses. Stay on top of this and you will save you a ton of time next year.
• Consider a separate bank account and credit card for your business income and expense.
• Create envelopes or filing/scanning system for different receipts (medical, charity, business, etc).
• Adjust your W-4 if you find that you got too much money back this year. Big refunds are bad, right?
• Do a little bit of tax-advantaged retirement saving to save you money on your taxes next year.

Good luck! What are your tips for getting organized for filing your taxes? I’d love to hear your take in the comments below.

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