3 Ways To Get Organized For Tax Season
What do I need to do to get organized for tax season- without going crazy?
Getting organized for tax season can feel like moving into a new house. You have far more stuff than you realize, and it feels like it's going to take forever to get organized. I feel your pain, but it doesn't have to be this way!
With a little bit of planning, you can painlessly (OK, somewhat painlessly, after all, we're dealing with the IRS) get your documents for tax season ready.
The following are three steps you can take to get organized for tax season:
Choose how you intend will file your taxes.
Gather and organize your tax documents
Reviewing current tax information and recent changes. , so you are an informed consumer. I’m not asking you to sit for the CPA exam. I’m asking you to take a few minutes to understand what are typically deductions, and what you may qualify for, so you are making an informed decisison.
1. CHOOSE HOW YOU WILL FILE YOUR TAXES
The first step to getting organized for tax season is to figure out how you are going to file your taxes. You have four options: Mail, Tax Software, Tax Software + Tax Professional Audit, or use a tax professional to file your taxes.
Old School Snail Mail
Get the IRS form(s) you need from your local library or download it from the IRS and your state’s websites. Next, complete the forms using the tax form instructions and mail your document (s) to the IRS.
Use Tax Software
Nowadays, tax software programs practically do your taxes for you. Depending on your income, you may be able to efile for free with several providers. You can also use the following resources for free assistance:
VITA Income tax assistance program. This program provides free tax help for qualifying taxpayers.
IRS- Taxpayer advocate. An independent organization within the IRS to help people with tax problems.
DIY Tax Software+Tax Professional Review
Tax preparation service with an option to have a tax professional review your returns. The Balance does a review of the 6 Best Tax Software Programs.
As a CFP with nearly 20 years of experience, I was scared to do taxes by myself. I use Turbo Tax, and the process was so simple I felt embarrassed for not using them sooner. I signed up for the option that included a CPA review. The CPA patiently walked me through my returns and answered my questions.
Tax Professional
If you decide to use a tax preparer, Research your preparer if you want a tax professional to file for you. You’re ultimately responsible for the information on your tax return.
Use the IRS’s Ten Tips For Choosing A Tax Preparer checklist to research and interview potential tax preparers.
Research the different types of tax preparers to ensure the one you choose has the expertise you need. The two most common tax credentials are Enrolled Agents and Certified Public Accounts.
When you find a professional you like, go on your state’s website and quickly check their record, #3 on the IRS’s checklist
2. GATHER AND ORGANIZE YOUR TAX DOCUMENTS
Once you've chosen how you are going to file, your next step to getting organized for tax season is to gather your tax documents. Create a physical and electronic folder to gather your tax documents.
Nowadays, you’re likely to get mailed and emailed tax information. You can either create a folder in your email box labeled for the current tax year and/or create an electronic folder marked for the current tax year in Google Drive or your preferred cloud storage. Below is a list of common tax documents. Always ask if you're unsure if you need a tax document. It's better to take the time to ask, rather than have the headache of dealing with the IRS.
Below is a list of the most common tax documents. Not all of the documents will apply to you.
Employed
W-2’s for you and your spouse (Income earned from an employer)
Receipts for classroom expenses (K-12 Educators)
Records of unreimbursed employee expenses
Unemployed
1099-G (unemployment)
Self-Employed
1099-MISC, 1099-NEC if you had a side hustle, part-time business, contractor
Schedule K-1
Estimated tax payments- Form 1040-ES
If depreciating- business-use asset information
If applicable, office-in-home information
1099-K- If you are paid through a third party like PayPal or Amazon
List of expenses if you have a business reported on Schedule C
Retirement
1099-R, Form 8606(withdrawals from a retirement account)
5498-IRA contribution
Self-employment Retirement Contributions
Rental Income
Rental income/expenses
Estimated tax payments
Rental property information
Unearned Income (Savings, Investments, Dividends)
1099-INT (interest income)
1099-DIV (dividend income)
1099-OID (original issue discount- pertains to some bonds)
1099-B (sales of stocks, bonds, or other investments)
1099-C (cancellation of debt)
Schedule K-1 -Passthrough business
Business farming income
Form 6252-Prior year installment sale info
Other income
State tax refund
Record of alimony paid/received
Miscellaneous income: jury duty, scholarships, etc.
Gambling Income (W-2G or record showing income, as well as expense records)
Jury duty record
Hobby income and expenses
Prizes and awards,
Trust income
Royalty income
Any 1099 received
Home Ownership
1098: Mortgage interest, private mortgage insurance (PMI), and points you paid Investment interest expenses
Real estate taxes
Receipts energy-efficient home improvements
Record of moving expenses
Medical
1095-C -Employees who are part of a group employer healthcare plan
1095-A For those enrolled through the healthcare marketplace
5498-SA-HSA contributions
Payment records for healthcare expenses
Medical Savings Account (MSA) contributions
Childcare
Daycare fees paid
Payments to babysitters while at work (child under 13)
Adoption costs
Education/Education Savings
1098-E Student loan interest paid
1098-T From education institutions
Receipts- Qualified education expenses
Records of scholarship/fellowships records received
5498 ESA- Coverdell savings contributions
5498 QA- ABLE account contributions
Charitable contributions
Cash Donations from charitable organizations
Mileage for charitable or medical purposes
Non-Cash Donation records
Other
1099-G State Tax Refund
Casualty and theft losses
State and local taxes paid
Vehicle Licensing Fees
Last year’s federal taxes.
Last year’s state taxes
Dependent information-birth, social security numbers
Stimulus Payment Information- IRS Notice 1444, 1444-B
If you experienced a natural disaster
Record of property loss
Record of rebuilding/repair costs
Insurance reimbursements/claims to be paid
FEMA assistance information
If you received a stimulus check/advanced child tax credit
IRS Letter 6419: Amount of Advanced Child Tax Credit received. Letter sent between late December 2021 and early January 2022.
IRS Letter 6475: Amount of the third economic impact payment, received between March and December 2021. IRS states letter is scheduled to be sent in late January 2022.
3. REVIEW CURRENT TAX LAWS
Third, before you start filing, quickly review current tax laws. The Tax Foundation does a great job breaking down tax information that sometimes gives me a headache into easy-to-understand bite-size pieces of information.
The more informed you are, the better you know what help you need and what deductions you may be eligible to claim.
In Conclusion
Getting organized for tax season is as simple as:
Choose how you will file your taxes.
Gather and organize your tax documents
Reviewing current tax law.
Getting organized for tax season doesn’t have to be a headache. In the three steps, you are ready for tax season.
Once you've conquered taxes, if you a
