Are You Ready for Tax Season?

by Miranda Marquit · 4 comments

As the year draws to a close, it’s time to think about what’s coming in terms of your taxes. Even though the new year hasn’t started yet, it’s a good idea to start getting ready. After all, you might have a few deductions to squeeze in. And, you’re guaranteed to beĀ happier if you have your documents together and you aren’t scrambling to prepare your taxes at the last minute.

Here are some ways to ensure you’ll be ready for tax season:

Look for More Tax Deductions

You’ve got a little bit more than a month to add a couple more tax deductions to your situation. Now is a good time to open another retirement account (you get a deduction for contributions to a traditional 401(k) or IRA), or boost your contribution — if you have room — to existing accounts.

You can also donate to charity. If you have items in good condition, or money that you want to give, it’s possible to donate a little bit more. It’s the perfect time of year, too, since so many people are in need during the holiday season. If you itemize, one more charitable contribution can make a big difference in the long run.

If you have some losing stocks, consider selling them and harvesting the loss. Make sure you know your cost basis, and know exactly how much you have lost. You should get a statement helping you figure this out. Your tax losses can offset capital gains, as well as other income.

Look around for other possible tax deductions for which you might be eligible. I decided to have professional headshots for my business taken recently, rather than waiting until the beginning of the new year, so that I could deduct the cost this year. You can look for business tax deductions, or some other expense that you need to make. You spend money as planned, and you reduce your income.

Organize Your Tax Documents

If you haven’t already, now is a great time to organize your tax documents. When the new year rolls around, you won’t want to be bogged down with trying to find everything. Start organizing the documentation and receipts that you need, as well as forms that you receive in the mail. Set up a folder for those items, so that you know exactly where they are.

Take a few minutes each day to work on organizing your taxes. This will make the task less daunting. While you’re at it, you might as well put a system in place to help you organize your tax documents year round. That way, you don’t have to worry too much about getting everything back in order in future years.

Even if you have someone else do your taxes, it can be a good idea to get things organized. You want to arrive at the accountant’s office with everything you need. The first time I went to my accountant, I didn’t have everything, and it took a bit of running around to collect it all. Having it together at the outset can really help you save time, even when you’ve hired outside help.

Start now, get your taxes in order, and you’ll avoid a last-minute rush at tax time.

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{ 4 comments… read them below or add one }

Lance@MoneyLife&More November 27, 2012 at 7:13 am

Keep in mind if you think tax rates will be higher next year you may want to accelerate income and defer expenses. Totally depends on your individual situation though.

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MoneyNing November 27, 2012 at 10:17 am

You know times are changing when tax reduction advice is now completely opposite of what tax professionals usually recommend!

Whatever happens with the tax rates, I hope that people are able to find as many deductions as possible!

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KM November 27, 2012 at 6:31 pm

As a proponent of maintenance rather than repair, I recommend keeping a tax file throughout the year and using it when doing taxes. I make a new file for each tax year and store in there any receipt I think may be used for taxes, such as medical expenses or donations. That way, when tax season rolls around, I just pull out my file and start adding up receipts and inputting them into TurboTax. I have never hunted for anything I need for taxes. I also put them in a manila folder when I am done and archive everything for each tax year.

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bryan November 30, 2012 at 5:36 pm

Great advice, preparation and organization is key. Specifically if you are itemizing deductions. I had to learn this the hard way last year!

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