Income Tax: Accounting and Pre-Accounting Strategies

Income tax accounting can be a daunting task that most taxpayers dread. There are many forms to gather, receipts to add and ever changing rules to remember. By following a few steps, you can make this year's taxes easier to prepare and lay the groundwork for next year's taxes to run smoothly.

Gather All Documents

There are many documents associated with income taxes. You need your 1099s, w-2s, statements from your mortgage company, student loans company and any applicable receipts. If you are claiming medical expenses or job expenses, you need the receipts. It's the same for charitable deductions. These records should be kept for at least three years.

Know Your Situation

If you want to maximize your savings you need to know what tax credits and adjustments you will qualify for. If you had a life change, such as a marriage or birth of a child, these will change your tax situation. Knowing whether you qualify for these credits is important. The IRS is constantly adding or changing tax credits.

Be Organized

Before starting your taxes, you need to complete the legwork necessary to make filing a breeze. Add up all receipts from the previous year. You should do this as you go throughout the year. If you didn't, then this is the time to plan for next year. Get a journal and keep a running tally. File away bank and credit card statements if you have qualifying expenses on them. Keep pay stubs and cashed checks. This will make the actual filing simple and accurate.

Use Your Computer

For those that choose to do their own taxes, software has made this easier. Even those who are not educated on tax laws and changes will be confident in the accuracy of their return. Programs such as TurboTax and H&R Block Online guide you through all of the steps. You will be prompted when a credit is available to you, or if you made a mistake it will alert you. You don't need to be worried about your math since everything is done by the software. You can file online for your Federal refund and have it deposited in your bank account. Most states have an electronic filing option also.

Consult a Professional

If your taxes are very complicated, consult an accountant. If you choose to use an accountant you will pay dearly for walking into their office with a shoebox of receipts. You still need to do the proper preparation before your appointment. Your accountant will want all receipts added up and ready for him. He will expect all documents to be available. If you don't give the accountant a 1099 you received he will not know you had that income, and your taxes will be incorrect. This is why it is important to keep accurate records and stay organized.