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Tax Filing and Organization Tips
December 2004

Yes, it's the end of another year and it's time to start thinking about starting fresh in 2005! It is also a good time to start planning and organizing for your 2004 tax returns instead of waiting until the deadline this coming April. Filing taxes is a yearly ritual we all dread, so I put together some tax filing tips to help make it as painless as possible.

The first and most important step is organizing your tax files. I found that this helped me the most when it came to filing for my taxes. I purchased one of those A-Z, 1-10 accordion type organizers that has the lid and a strap on the top. Throughout the year, I put tax related documents in the folder. It doesn't take a ton of time to organize throughout the year. Some tax related documents I didn't have the time to even open, I just popped the envelope into my folder to open when I was read to file!

Basic categories to organize your tax documents during the year

  • Income - These would be your W-2 forms, pay stubs, 1099 forms.
  • Real estate - Every year you should receive forms showing tax assessments and interest paid on your mortgage. Any receipts for home improvements should also be filed away here.
  • Medical bills - Any receipts and out of pocket expenses go here.
  • Student loans - Keep these statements showing the interest paid.
  • Child care - Whether you have a nanny or send your child to day care, you can deduct some of these expenses.
  • Donations - Any documentation or receipts related to cash & non-cash donations.
  • Brokerage and bank statements - Buying and selling stocks in regular accounts have tax implications, as does any interest earned, so filing these is away is critical.

So now you have everything organized.

Great!

Next I have some tax tips to reduce your potential tax bill and hopefully increase the size of your tax return. Again, just like my organizer tips above, some of these take just a little planning ahead of time.

  • Make a contribution to your IRA accounts. Depending on your income level, contributions to a regular IRA account are tax deductible. You have until the tax filing deadline (April 15, 2005) to make the contribution for the 2004 tax year.
  • Sign up for a flexible spending account. These are accounts that your employer may offer related to childcare and medical expenses. Basically what happens is a certain amount of your income is moved into this account pretax. This lowers your taxable income! Research the fine print of your plan carefully and understand that any money that has not been used for that year, is forfeited.
  • Sign up for your employer's 401k plan. Just as with the flexible spending account for healthcare, the contributions to these plans is pretax, which lowers your taxable income. Not only are you saving for your future and reducing your taxes, in many cases your employer will match up to a certain percent of your salary! If your employer matches dollar for dollar up to 3% of your salary, you just gave yourself a 3% raise!
  • Consider the tax advantages interest on your home mortgage. The interest on your mortgage is tax deductible. If you take out a home equity loan to consolidate your bills, or fund a large purchase, that interest is tax deductible.

I know it's painful (it is for me!), but if you take a little time to organize your documents and plan ahead for the coming year, you will not only save money, but save yourself from serious tax filing headaches!

Don't procrastinate until April to think thinking about your taxes. Think about them now, before the new year starts!

Great sites and resources help with your taxes:

  1. IRS Publication 17 - This is a pdf document (over 300 pages!) that contains basic information and explanations to help you file your taxes.
  2. IRS Website - Believe it or not, their site is very easy to use. Get and print your tax forms here.
  3. H & R Block - The largest tax return company in the U.S. that will help prepare and file your returns. They can also look at your previous tax returns to see if you left any money on the table by paying to much in taxes.
  4. Mega tax link list website - I've used this site many times to find tax related web sites. If you can't find it here, it probably doesn't exist!
  5. You can download and install TurboTax Basic and follow their easy step by step tax filing process.
  6. Instead of using software, you can calculate and file your taxes online! Prepare and E-File Online. Fast Refunds. TaxBrain.Com

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