When it comes to income taxes, it pays to be organized.
Begin gathering your tax information as early as it is available. You should receive most of your 2014 tax documents by early to mid-February 2015.
Probably the most important document you need to locate is a copy of last year's tax return. The tax situation of most individuals does not change dramatically from year to year. The information shown on last year's return is a good guide to what you need to look for this year.
On the other hand, if you experienced a life event during 2014, your tax situation could be in for a big adjustment. Life events include marriage, divorce, birth of a child, retirement, a business startup or a change in employment.
Everyone's situation is different, but most people receive some common tax documents in the mail:
- Employers will send you W-2 forms.
- If you freelance, clients that you completed at least $600 worth of work for during 2014 should send you a 1099-MISC form.
- If you've earned dividends on mutual funds or other investments, you should receive one or more 1099-DIV forms from the account administrator.
- If you received a distribution from an IRA or a company retirement plan, you should receive a 1099-R form.
You may receive other income tax-related forms as well:
- Receipts or acknowledgments for charitable donations
- Real estate and personal property tax receipts
- A 1098 form from your mortgage company
- A 1098-T form if you paid college tuition costs
All of these forms will be needed to determine whether you qualify to itemize your deductions.
If you are self-employed, you will also need to gather receipts for all deductible business expenses. Check out IRS Publication 535 for more information about business expenses.
While you're digging up all these records, look ahead to next year at this time. Sort everything and create files to hold:
- Bank, credit card and retirement account statements
- Receipts for deductible items and charitable donations
Then keep items sorted as they come in during 2015. If you rely on this method, next year's income tax return should be easier to prepare.