Tax season is a few months away, but it's never too soon to begin preparations for filing income taxes. Preparing for tax time at the dawn of a new year can make the process go more smoothly in the months ahead. Here are some tips on how to prepare for the upcoming tax season.
Start a documents folder. Employers, charitable organizations, banks and other financial institutions begin mailing out tax forms from the previous year in early January.
Begin collecting receipts and itemizing expenses. Many expenses are tax-deductible. These can include education costs, moving expenses, home improvements, medical expenses, charitable donations and childcare costs.
Create a spreadsheet of important information. It is handy to have all financial information at the ready. Some accountants will lower their fees if people do some of the filing preparation work themselves. Decide on a filing option. Technology has made filing taxes much easier. Tax preparation software is available for those who choose to file their taxes themselves. There also are walk-in centers that will prepare tax-filing documents.
Start saving money. Although the goal is to get a refund each and every year, taxpayers sometimes owe money, which can be troublesome for men and women whose budgets are stretched thin already. Those who owed money in the past should begin saving money for tax expenses as early as possible.
Develop a good filing system. Many financial professionals will advise people to keep financial records for 7 years.