Five simple moves after New Year’s Day can make tax filing easier

Tax season medium

There’s nothing fun about paying taxes. But by taking these five steps in January to organize your paperwork, you could avoid getting frustrated, frazzled, and perhaps befuddled come tax time.

1. Make a copy of your 2011 tax return and attachments. With this to guide your 2012 tax prep, you’re less likely to forget a source of income or a deduction.

2. Collect the tax IDs you’ll need. You’ll want your dependents’ Social Security numbers and the SSN of anyone you employed (e.g., a babysitter, housecleaner, or nanny).

3. Start a file folder labeled “Income.” Put in it the following tax forms you’ll receive in January:

  • W-2s and 1099-MISCs from employers
  • 1099-INTs reporting interest income
  • 1099-DIVs reporting mutual fund or stock dividends
  • 1099-Bs reporting brokerage transactions

4. If you itemize, start another folder labeled “Deductions.” Some of the information that goes here will come by mail; the rest you may have to dig up yourself.

  • 1098s reporting interest you paid on mortgages and equity loans (also real estate taxes, if included in your monthly mortgage payment)
  • A receipt for real estate taxes if you paid them yourself
  • A copy of your W-2s showing state and local income taxes you paid
  • A receipt for personal property tax from your town or the taxing authority
  • Receipts for charitable donations, including mileage
  • Receipts for medical expenses, including mileage
  • Receipts for bills incurred while job-seeking

5. Rev up your retirement saving. There’s still time before April 15, 2013, to contribute to a 2012 Traditional IRA or Roth IRA. You can put aside up to $5,000 or $6,000 if you’re 50 or older, although income limits may apply. (For details, search “IRA Contribution Limits” at Don’t have an IRA yet? Ask us about our insured IRA choices.

VSECU does not provide tax advice. We recommend consulting a qualified tax professional to determine how tax laws may apply to your situation.

Save or shred?

“The average person spends one to two hours a week looking for things, with 80% of what they sift through belonging in the trash can.” That’s a professional organizer speaking – someone who tries to help clients get ready for tax season. The trouble is, most of us don’t know what to can and what to keep. Here are some tips:

You should save:

  • Tax returns and supporting documents for the past six years
  • Receipts that support your tax deductions
  • Year-end account statements
  • Deeds and car titles
  • Wills and powers of attorney
  • Medical directives
  • Life insurance policies
  • Professional licenses or certificates
  • Pension and retirement plan documents

It’s usually okay to shred:

  • Tax returns that are more than six years old
  • Credit card and bank statements that you can look up online
  • Debit and credit card slips
  • Old utility bills

Many advisors suggest that clients scan documents they need to keep, and store them on a flashdrive or CD-R, or “in the cloud” with a storage service. Dropbox and iCloud, for example, allow you to store password-protected files of a certain size free on a remote server, which you or an authorized user can access from anywhere.