For many taxpayers, simplifying the process of preparing their income taxes is a goal that seems unachievable most of the time. But, while you can't control how the IRS or Congress design income tax requirements, there are some things you can do to help make your personal tax filing easier. Here are five ways:
Update Addresses. Notifying your (current and previous) employers and anyone else from whom you expect to receive a tax form that you've moved is no fun. But it can save you a lot of time and hassle when you're trying to gather all your forms to file taxes promptly. Waiting until after January 1 to update your address can result in delayed forms, lost forms, increased verification of your identity, and a delayed return. Also, some companies charge for multiple copies of your Form W-2, so updating saves money.
Go Electronic. In the modern world, opting to receive forms electronically is getting easier and easier. Take advantage of that to make your own life easier. Rather than wait for the mail to arrive, getting electronic Forms W-2, Forms 1099, and Forms 1098-T means you won't lose the copy, and you can get started on tax preparation earlier.
Organize Expenses. Take some time now to start organizing your business, medical, or employee expenses now. While it's ideal to keep them somewhat organized—at least by placing them all together and labeling them—throughout the year, the earlier you spend some time doing so before tax season, the less stressful this task will be. Also, be sure you're using either an app or a mileage log book to track or recreate the related mileage. An organization system, even if simple, will make tax preparation much easier and cheaper.
Make a Checklist. If you receive more than a simple Form W-2, it's a good idea to make a physical checklist of what you need to take to the tax preparer. Include things like these:
- Valid identification
- All income forms
- Records of business, medical, or employee expenses
- Names and Social Security numbers of dependents
- Form 1098-T for anyone in college
- Student loan interest statement
- Proof of expenses being itemized
- Proof of health insurance coverage
Many of these items can be collected before the end of the year, so you can get a head start now rather than rushing around in January.
Consolidate Accounts. Over a lifetime of jobs, moves, and different benefit structures, you may have accumulated several different brokerage accounts, bank accounts, retirement accounts, and royalty payments. The more you can consolidate those into fewer separate payments, the less you will have to organize and report at the end of each year.
Tax preparation can be a less stressful event if you work now to make it run more smoothly. By consolidating what you can, creating an organization system, and getting records in an efficient manner, you can take control of the process and make it more enjoyable.
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