Hi Everyone,
With the end of the year looming and April 15 on our brains, it may *sigh* become time to think about what we need to all assemble. Whether we are preparing taxes ourselves, enlist the help of tax software, or have a professional complete your returns for you, there are certain forms that you cannot escape from. Although you cannot escape from them, you can minimize the stress you put on yourself by assembling everything in a lean manner. Create a file, or at least a pile, of items you find on this list to help you save time when handling taxes.
Think of taxes as a partnership between you and your government. You need the government to make laws, protect you, as well as allocate appropriately whatever additional tax that is collected. The third one seems a little grey, but with the amount of tax that is collected, I feel much better knowing that there are watch dogs to make sure the tax is being used properly!
When thinking of this partnership, think of any financial gain, as well as loss, that you have incurred in the year. Tax is based off of economic gain, rather than pure addition and subtraction. If I am better off than I was before, chances are we should pay tax to the government, much like you would give some to family, friends, church or a business partner. Bearing this in mind keep any income documents you may have from income:
1. Income: A W-2 form or a 1099-MISC
2. Investment: 1099-B or 1099-D
3. Retirement: 1099-SSA (yes, I know, the shame of taxing that!) or 1099-R
4. Gambling: W2-G
Really to make it simpler, if you see W-2 or 1099, chances are you should file it, or at least pile it (together, with other tax documents mind you)! As support it may be a good measure to save any bank statements, and anything from your investments.
Through this partnership with our government, there are certain things that should not be taxed. This is either a set amount (calculated by the IRS as a ‘poverty line’ you could think of it as), which is around $5,500 per person, per year. If you perform certain ‘socially useful activities, ’things that the government wants you to do, they will tax you less. Certain things like go to school, buy a home, or have kids would all qualify under these socially useful activities. They also give special exemptions to everyone, regardless of these certain “non-taxed” items. To make sure you are taking advantage of these socially useful activities, keep record of some expenses:
1. Property tax bill (with proof of payment)
2. Mortgage Interest paid on a mortgage (with proof of payment, on 1098-E)
3. Child Care (with proof of payment)
4. Medical bills (you get the drift!)
5. Tuition! (1098-T, received in the mail at year end)
These proof’s of payment are simply receipts in most cases. And many of these ‘socially useful activities’ understand the benefit and mail you a year end statement. Throw those on the pile also!
I wonder whether you see a pattern in the form numbers? See, there is order amongst sometimes apparent chaos! Remember, regardless of how you beat the April 15 buzzer, you will need these documents. And let me also note; that this list (although just beautifully written in my humble opinion!) is not all encompassing, and when in doubt, throw it on the pile (or maybe a shoebox now?).
And although the tax code is 2,139 thousand words long, remember it is tailored to the needs of over 300 million people! I will end this one with a personal touch, for those still reading: a video that Jamie and I made to announce our wedding website!
Merry Christmas everyone!
Kevin
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