While driving home from work the other day, I was listening to a call-in show on NPR. A woman called to find out the best way for her family to save money for their child’s college fund. It made me think about how expensive our little bundles of joy can be. The good news – kids don’t always separate you from your money – sometimes they actually help you keep some! Here are a few ways your kids will help fatten your wallet come tax time.
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A new year is underway, and the IRS is officially accepting tax returns starting January 21, 2014. It’s time for you to get organized and figure out what you need to do in order to create a smoother situation this year. Here is a tax time checklist that can help you avoid the stress and rushing around that often comes with tax season:
Collect Your Documentation
When you fill out your tax return, you do so with the help of various documents. Be on the lookout for documentation from employers, lenders, and others. Here are some of the common forms to set aside (I like to use a folder for this purpose in order to keep everything together):
- W-2 (for you and your spouse, if applicable)
- 1099 (all types, including interest and dividends)
- 1098 (your mortgage interest statement, but there are also other types for certain donations and for student loans)
- Brokerage account statements and tax forms (which should include your cost basis for figuring capital gains and losses)
- Receipts for donations, business costs, and other tax-advantaged expenses
- State income tax, property tax, and sales tax documentation
- Other documentation related to income, such as alimony (child support isn’t usually taxed), jury duty pay, unemployment benefits, Social Security income, etc.
- Any other documentation required to “prove” you are eligible for tax credits and tax deductions (including medical expenses, casualty losses, moving expenses, job hunting expenses, etc.)
You will also need the Social Security numbers for yourself, your spouse, and any dependents that you claim on your tax forms. If you don’t have the Social Security numbers for your children, you won’t be able to claim the EIC and other tax breaks.
If you have an S-Corp. or LLC, you will need to prepare other documentation, possibly including a profit and loss statement, and payroll information. Consult with a tax professional if you are unsure about what you need for your business.
Start filling out your forms early. This will give you a chance to figure out what you need, and give you the time to gather what you might be missing. Fill out what you can, and keep a list of items you might still be missing. Some organizations won’t send out tax information until January 31, so you might not receive it until February. This isn’t an excuse not to get started, though. Make a list of missing items, and check them off as they come in. Then, if the end of February rolls around, it’s time to follow up. This can help you avoid the last-minute scramble when there’s an oversight.
If you have someone else prepare your taxes, call ahead of time, and ask what’s needed. This will make your tax preparer happy, and allow you to better prepare.
Read the original article here.