Tax time might be out of sight once again, but it shouldn’t be out of mind. There are ways you can — and should — be prepping for next year’s round.
In the video below Money Talks News founder Stacy Johnson has some tips on how to prepare for next year’s tax season right now. Check it out, then read on for more ways to prepare and save some money to boot.
Now that you have this year’s taxes out of the way, it’s time to get a jump on April 15, 2014.
1. Keep personal information organized.
Were you scrambling to find your kid’s Social Security number? Did you forget your spouse’s birth date? Tracking down this information just adds more time to an already time-consuming process. Pick a safe spot to store all the info you need. Consider a fireproof and waterproof safe like this SentrySafe for $39.97 at Amazon, which is also large enough to store important letter-sized documents.
What to store:
- Last year’s taxes. You’re going to want this year’s tax returns to use as a guide for next year’s, so keep them in a secure spot. If your life doesn’t undergo major changes this year, filing taxes will be a breeze.
- Personal data. Keep a list of important information like Social Security numbers and birth dates for you and your family.
- Receipts. Start a receipt folder to store anything you might be able to deduct at the end of the year, such as home improvement purchases or business supplies.
2. Go digital.
If you’d rather go paperless, there are apps for that like DocVault. It lets you save 3GB worth of encrypted pictures and tax-related material like receipts and invoices, and allows you to add notes and tags to the photos for easy organization on DocVault’s servers. Come tax time, you have the option of transferring those images directly to filing services TaxAct Deluxe or TaxAct Preparer’s Enterprise, but you’ll have to pay for them first.
Receipt Catcher is an app that lets you take a photo of a receipt, tag it with info, and then email it to yourself. When you’re ready, you can print out a year’s worth of receipts in a few clicks. The app costs 99 cents and is available for both Android and iPhone.
3. Start thinking about tax breaks.
Before you file those papers away, review which deductions and credits you qualified for in 2012 and determine which ones you’ll be able to use this year. For example:
- Home renovations. If you’re planning some home improvements, check out EnergyStar.gov’s list of products that qualify for a tax credit.
- Home office deductions. I work at home, so I take advantage of all the deductions I’m allowed. Double-check and make sure your home office meets the IRS’s requirements. Read Tax Hacks 2012: Home Office Deductions and be sure you’re doing it right. Filing a Schedule C makes you 10 times more likely to get audited. Now is a good time to check this IRS fact sheet on what you can and can’t deduct if you plan to upgrade your office.
- Other deductions. Finally, check out Tax Hacks 2012: 8 Easy-to-Miss Deductions for other possibilities.
4. Review your documents.
Use your 2012 return to spot where you can and should save more money this year. For example:
- Mortgage rates. If you haven’t already, maybe you should consider refinancing to a lower interest rate.
- Retirement savings. If you haven’t put any money away for retirement, start now, even if it’s just $40 a month. Read 6 Ways to Have More Money When You Retire.
5. Don’t withhold too much.
Uncle Sam loves getting interest-free loans, and many taxpayers make it possible by overpaying their taxes. Last year, the average tax refund was $2,803. But there are ways to keep that money in your pocket. We have tips, like using the IRS’s withholding calculator.
Take a few minutes to research what changes are in store for this year. Will the deductions and credits you used for 2012 be around for 2013? Are new deductions available? The more you know now, the easier it will be to minimize your tax liability.