As you receive 1099s, W-2s, and other documents, file them together in a safe place. Take a moment to pull out a file folder, label it, and keep it secure and accessible. As a document comes in, add it to its designated folder. Even if you scan your documents and make digital copies, you still need a place to store them temporarily. An easy way to combine digital and hard copies is to snap, save, and sort them into your phone’s photo albums. That way, you have a digital copy as a backup.
You should see a W-2 form from your employer in your mailbox by the end of January. It may also be available online if your employer uses an online payroll system. Independent contractors should also be on the lookout for a 1099 form from each of their clients. Other tax forms include dividend income (1099-DIV), interest income (1099-INT & 1099-OID), retirement plan distribution (1099-R), sale of home or (1099-S), capital gain transactions (1099-B), distributions from an HSA, and unemployment compensation (1099-G). If you’re missing a W-2 or 1099 in mid-February, track it down.
Last year’s return is a great starting point for this year’s tax filing. By reviewing your return from last year, you can quickly see what tax information you probably need now. Once you have gathered these forms, organize them by category. Depending on the complexity of your tax return, you may want to use file folders, paper clips, boxes, or other methods to categorize documents. If you are a business owner or an independent contractor, you must keep each business’s information separate. Whether you file your own taxes or use a tax professional, this will help simplify things.
If you plan to itemize your tax deductions, a good rule of thumb is to create a list of what expenses you need to track. For example, you may need to get tax information from your childcare provider. Most taxpayers tend to take the standard deduction. However, if your itemized deductions add up to more than the standard deduction you qualify to claim, itemizing might be a better idea. It only makes sense to itemize your deductions if your deductible expenses are more than the amount of the standard deduction.
Review the year’s milestones. Did you get married this year? Have a baby? Buy a house or a car? If you got married, check that your filing name matches what’s on your Social Security card. If you moved, be sure to update your address — you can do that as you file. You’ll also want to decide how you and your spouse will file this year. By addressing little things early and clearing away potential filing obstacles, there’ll be nothing standing between you and filing without the stress.
