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Time for annual tax chores

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iStockphoto.com

It's time to prepare for the first major financial event of the new year: filing your income taxes.

Tax-filing season began Friday, a bit later this year than usual, because the government shutdown gummed up the preparations. But despite the shutdown, the April 15 deadline is not affected, so now's the time to start gathering those all-important documents.

"In most cases, the IRS doesn't require you to keep records in any special manner, but you should keep any and all documents that may have an impact on your federal tax return," said Clay Sanford, an IRS spokesman. "It's important to get into this routine, because you may forget expenses that qualify as deductions unless you record them when they occur."

Sanford recommends you "retain a record for every line item on a tax return. For businesses, records for purchases, payroll, sales and other transactions come into play, but even if you just file an individual return as basic as a 1040EZ, keep the forms that you used to fill it out."

Here are the documents you need to prepare for the filing season:

• W-2 Wage and Tax statement: This shows how much you earned in 2013, how much of your income was taxable and how much tax was withheld. You should have gotten your W-2 from your employer by now.

If you're an independent contractor, you will get a Form 1099-MISC showing your earnings from the company you worked for.

• Documents that show other income: These include Form 1099-INT for interest income, Form 1099-DIV for dividends you received. If you used a stockbroker for transactions, you will receive Form 1099-B.

• Records for charitable contributions: To ensure the deductibility of your contribution, you must have the right documents to back up how much you've donated.

For donations of less than $250, you need a canceled check or credit card receipt showing the amount of your contribution, or written communication from the charity showing its name and the amount and date of the contribution or other records containing this information.

For donations of $250 or more, you also must obtain written proof for every separate transaction. The written acknowledgment must include the amount of the contribution or a description of donated property, along with a description and good-faith estimate of the value of any goods or services you received.

• Records supporting other itemized deductions: These include invoices, receipts, canceled checks or other proof of payment for property taxes, mortgage interest, mileage traveled for work and medical expenses, among other things.

"One overriding thing is to know that any deduction you take must be supported and all income must be reported," said Ken Sibley, a certified public accountant.

After you've gotten all your documents together, don't delay in filing your return because it can reduce the risk of identity theft, experts said.

"File early," said Trey Loughran, president of the personal solutions unit at credit bureau Equifax. "If you file your tax return first, an identity thief will be denied when trying to use your Social Security number for a fake return."

The other advantage: The earlier you file, the earlier you'll receive any refund due.

According to the IRS, most taxpayers who file electronically and choose direct deposit will get their refund in 21 calendar days or less. Taxpayers who file a paper return and opt to get their refund as a check will receive theirs in four to six weeks.

But don't rush to file your return if you don't have everything together. And before you file, make sure your Social Security number is correct on the documents.

Time for annual tax chores 02/02/14 [Last modified: Sunday, February 2, 2014 7:22pm]
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