Well, 2019 is here ladies and gents. That means we all get to part take in our favorite yearly activity; preparing for the upcoming tax season! All kidding aide (because I hate it, and I'm sure you do too), when it comes to tax time, filing your taxes can be a daunting experience, especially so for those who are unorganized. Today, I've got 5 handy tips to help you stay organized and get those year 2018 taxes knocked out! For those small business entrepreneurs and 10-99's out there, this one's for you!
1. Gather All of Your Receipts
While you may be diligent about saving your receipts throughout the year, there is a good chance that they are simply stored in a file folder or box, with no particular order to them. Before you sit down with your tax professional take the time to sort through your receipts and get them organized so you can find what you need when it comes to itemization. If you are a business owner as many of us are, you'll need to take even more care! The main categories that you should sort your receipts into include:
- Home expenses: This should include utility bills, repairs, and maintenance.
- Vehicle expenses: Include receipts for maintenance and repairs, fuel, license and registrations, rental or lease agreements, and a log of personal and business miles.
- Education costs: Have receipts for tuition, fees, books, and other education expenses.
- Childcare: Your child care provider should give you a form listing the amount paid, but having your canceled checks or receipts can be beneficial.
- Medical costs: Keep track of your out of pocket premium costs and other expenses such as deductible payments, prescriptions, and copays.
- Charitable donations: Have receipts for all monetary and good donations to non-profit charities.
- Business expenditures: If you're a business owner or 10-99 independent contractor, this is perhaps the most important part. Hopefully you've kept all business expenses separate and running through a business-only account.
2. Get All Your Necessary Paperwork Together
A quick way to interrupt your tax preparation is by realizing you are missing a form that you need to complete your tax return. While most of your documents should be received by the end of January, there may be some stragglers. Make a list of all the forms you expect to receive regarding income, investments, and education expenses, and make sure that you have them before you begin your preparation. Some of the forms you may need to wait for include:
- W2s and 1099s which will provide you with your earned income.
- K-1s which will provide income earnings from a partnership.
- 1098 which will detail the interest you paid on your mortgage for the year.
- 1098-E details the amount of interest on your student loans.
- 1099-B will come from your brokerage company and give a statement of the gains and losses of your investment accounts.
- 1099-DIV will list the earnings from mutual funds such as dividends and capital gains.
- 1099-G will provide the amount of unemployment benefits.
- 1099-INT will provide the interest income received from your bank accounts.
- 1099-R will list the distributions taken from pension or retirement accounts.
- 1099-SA is your Social Security benefits statement.
3. Determine the Deductions You will Want to Take
There are many of deductions you can take depending on your filing status. By knowing which deductions apply to your situation, you can gather the information you will need ahead of time to make sure you have the appropriate figures when requested. To take advantage of most of the common deductions, make sure to gather information on:
- Your retirement plan contributions both personally, and/or from your business.
- All business expenses
- Your yearly charitable contributions.
- Education and child care
- Mortgage interest.
- Points for mortgage refinance.
- Moving expenses for active duty military members and those moving for a service-related reason.
- Property loss due to theft.
- Gambling losses.
- Realized losses on investments.
- Energy-saving home improvements.
- Self-employment tax.
- Home office expenses if self-employed and working from home.
4. Make Sure You Have All the Necessary Forms
The specific tax forms you will need will largely depend on your individual tax situation, so your tax professional will be able to guide you here. Most taxpayers will need to file either a 1040, 1040A, or 1040EZ to report income for both employers and employed and self-employed workers. For self-employed workers, you may need a Schedule C to record business expenses, and most taxpayers will need a schedule A to itemize their deductions. You will also need to make sure that you have the same tax forms for each state and locality that you worked in if state or local taxes are required. It's a lot to keep up with, so personally I'd work with a professional. If you use a tax preparer or accountant to file your taxes, they will have all of the forms that your return will require.
5. Make a Tax Preparation Schedule
It is easy to get overwhelmed and wait until the last minute to get everything together for your tax preparation...plus you don't want your accountant having to chase you down. You can eliminate stress by setting a schedule that will allow you to break the preparation into small tasks each week before your meet with your preparer. Set a time to organize receipts, scan necessary documents, gather forms, etc. The final item on your schedule should be the meeting with your tax preparer making sure you schedule it far enough out that you don't feel rushed.
Don't let your taxes stress you out. Try one or all of the organization tips listed above to help be better prepared and make the process of tax preparation easier on everyone. Consult your accountant for any and all questions related to your individual situation, and good luck this year!
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About the author: Kyle A. Davis is a Chartered Financial Consultant® and president of Integrity Financial Group in Orlando, FL. He is a Florida native and an advocate for financial literacy and practical money education. When not assisting clients in planning for retirement, he creates educational videos on financial wellness on his YouTube Channel - https://www.youtube.com/user/financialplannerinfl