With tax season winding down this year, you would probably prefer to not think about next year’s taxes. But if you start your preparations now while it’s fresh in your mind, your tax-time headaches will be minor next year.
Whether you prepare your taxes on your own or enlist the help of a pro, you can take some steps to get everything in order throughout the rest of the year. Try out these tips and you’ll be well on your way.
1. Check your credit report. At tax time, financial information is flying – and identity thieves know it. To make sure that your information hasn’t been compromised, keep a close eye on your credit report. Any problems can take time to fix, and you’ll want them resolved by next tax season.
2. Re-order existing tax information. In the list of paperwork you should hang onto, tax information is right at the top. It’s recommended that you keep records for at least seven years. Go through any and all tax information you have and file it neatly, separated by year; use clasp folders to keep papers from slipping out. Keep other important financial information, like annual credit report documentation in the appropriately corresponding folders.
3. Make a “living” file. As opposed to files from years past, which you can close up and store, make a separate folder where you can stash any paperwork and information that will be relevant to next year’s taxes. While you won’t get forms like W-2s until the early part of 2012, you can add documentation for any deductible purchases such as energy-efficient appliances and donations that you accrue throughout the year. It’ll save you a lot of frazzled digging next spring.
4. Save up. While no one wants to be surprised with news that they owe the IRS, it happens. An unexpected windfall or underestimating your taxes could cause you to owe more at tax time. Set aside money throughout the year for a tax-related “rainy day,” and make it part of your regular household budget. If you don’t have a budget, now’s the time to get one set up – having recently checked your credit report, you’ll have a good idea of what you need to prioritize