How to Be Prepared for Tax Season

Keeping good records can save you lots of stress when it comes time to file your taxes. Each year during tax season, it’s time to reach out to a trusted South Florida tax advisor, you’ll receive requests for documents and information that you’ve piled somewhere. When you don’t have an organized way of keeping your records, it creates frustration and anxiety when you need to locate the information. But it’s not too late to start keeping good records.

If you want to keep digital records, you’ll need to set up some folders on your computer. Make sure your computer is a private device that is password protected. Never store personal information on a public computer; it would be better to keep paper records if you do not have access to a personal computer. The best way to digitally store these documents is to have a folder on your computer that is labeled with the tax year. Inside of the folder that is labeled with the tax year, you can create subfolders that are labeled with the categories of information that you need for the tax season.

What should you prepare ahead of time?

Listed below are the categories of information that tax preparation services west palm beach fl such as MJ Tax will require to complete your records during the tax season. These are the subfolders that should be created inside of the main tax year folder:

1. You’ll need proof of identification.

Social security cards are not easy to replace. They should be stored in secure locations such as a fireproof safe or in a safety deposit box. For easier access, you can keep digital or paper copies of yours and your dependents’ social security cards, but original copies should be securely stored. Create a subfolder called IDs and use a printer with a scanning function to scan all of the social security cards to keep in this digital folder. If you find that keeping paper records is more simple for you, make a paper copy of your social security cards to keep in a paper folder labeled IDs.

2. You’ll need to keep copies of your income statements.

Companies send W-2s and 1099 statements as proof of income. Look for “1099-” in the corner, indicating income. Companies must mail paper copies by January 31 or provide digital copies by the same date. Save digital income copies in a subfolder named “Income” with the tax year. If you receive a paper copy, scan and store it digitally or keep it in a labeled paper folder. Ensure you save W-2s, 1099 statements, SSA-1099 for Social Security benefits, and RRB-1099 for railroad retirement benefits.

3. Statements that reduce your virtual tax preparer burden.

MJ Tax Services south Florida and the US government considers these deductions which are subtracted from your taxable income. This is a good thing; it’s important to keep good records so that you may lower your tax burden. Look for forms with “1098” in the corner, covering mortgage interest, donations, student loan interest, tuition payments, and legal deductions. For quarterly taxes, check for a statement with “1040ES” in the corner. Deductions vary, so you may get many or none, depending on your situation. These statements are available by mail or digitally. Organize them in a folder labeled “Deductions” with the tax year, whether in digital or paper format.

4. The fourth type of information you’ll want to save to avoid IRS tax problems is receipts for expenses.

These include money you’ve donated to charities, paid for medical bills, any IRA contributions, and certain types of education expenses. Receipts of these types can pile up fast, making it difficult to keep accurate digital records. There are several apps that are available to help you with this. The most popular ones are QuickBooks, Expensify, Receipt Bank, The Kodak Alaris, and Bench. Take some time to research these to determine which would fit best for your financial situation.

These apps make it easy to scan and store receipts to save for your taxes. Of course, if you prefer the paper option, you’ll want to create a folder labeled “expense receipts”, followed by the tax year, and save them all in that folder.

5. The last thing you’ll want to have a digital or paper copy of is the previous year’s tax return.

Keeping these records throughout the year will significantly reduce your stress when tax season time comes. MJ Tax is a full-service Boca Raton accounting firm ready to serve you.