JP's Organizing Tips for your 2013 Tax Return

My seventh grade teacher, Mr. Smeraglinolo, used to say, “The only thing I have to do is die, and pay taxes.” I never appreciated the humor in that statement until I became self- employed. Tax time can be overwhelming, especially for the first timer, the freelancer, or person with multiple employers or multiple sources of income. Remember, it’s your money, and you want to be certain you are paying attention to detail when tax time rolls around.

To take some of the worry out of tax time, here are a few tips to support you in getting your information ready for your tax preparation professional.

• Create a list of all of your sources of income from 2012. This includes (but is not limited to) salary, interest on savings and checking accounts, profit from the sale of stocks, bonds or real estate, inheritances, and any bonus money given to you by your employer. For you corporate types; this should be easy.  Federal law states that you must receive an earnings statement  from all income sources by the beginning of February 2013. Verify that your current address is on file with these employers. If you are missing a form, contact them by phone or email and they can send you a replacement.
• Assemble all of your monthly bank statements, pay stubs (if you do not have a summary earnings statement), and any receipts for expenses during 2012. Each financial institution should provide you with an earnings statement for your account from 2012.
• Homeowners; save all receipts for work you have done to improve your home in 2012, your tax professional will let you know if you are able to deduct some of these expenses.
• Freelancers; save all of your receipts for travel expenses, meals, and anything you purchased to generate work in 2012. I write off all of my magazine subscriptions, the dues for the professional organizations I belong to, my cellphone, my internet and a portion of my rent because I have a home business. Ask your tax professional for guidance on this, it is different for every industry or profession.
• Do your homework! Ask for referrals for a great tax preparation specialist or an accountant who is familiar with your line of work. There may be deductions you are not aware of. The average cost of having a professional prepare your taxes runs between $50 and $150. It is worth every penny to have the peace of mind and the expertise. In the event you are audited, you will have someone to fall back on. Many of the “fast food” tax companies also offer protection in the event of an IRS audit, and instant refunds if you are strapped for cash. Ask, each of these “fast food” or tax “franchises” offer different perks. Find the one that is right for you. Check with the Better Business Bureau before you trust your taxes to one of these pop-up tax offices.
• File early! It is important to start your prep and search early. It is easier to get an appointment now with the best tax preparation professionals than it will be as tax time deadlines approach us! If you have moved to a different state since your last tax return, make the effort to find someone in your new area as soon as possible. Tax regulations vary from state to state. Make sure your tax professional is licensed and familiar with both the local county, state and federal tax codes.
• It is never too early to start preparing for your 2014 tax return! I have an accordion folder, each section is labeled, and I file my bank statements, utility bills, expenses, receipts, and any other information pertinent to my earnings for each year. Of course my accountant always gives me a look when I hand this over to him, but that is what I am paying him for!

Hopefully, these organizing tips have taken some of the guesswork out of getting prepared for your 2013 tax return. As always, live simply, do your best, and call in a professional when the going gets tough!