There's nothing like the coming of spring to raise your spirits, unless you're facing a shoe box full of tax information that you've put off looking at until the last minute.
Why not get an early start? With a little preplanning, you can make tax time less stressful, and you could end up with a few extra dollars in your pocket.
ORGANIZE YOUR TAX INFORMATION
Whether you're doing your own taxes or working with a tax preparer, make sure you have all the documents you need. You've probably been receiving a variety of tax information over the past couple of months. If, like many people, you've put it aside to look at later, don't delay any longer.
By taking inventory of your documents now, you'll have more time to follow up with information providers in case some records are missing.
Here are some things to look for:
- Do you have all your charitable receipts?
- How about Form 1098 showing how much mortgage interest you paid?
- Does the year-to-date information on your year-end pay stub match your W-2?
If you find any errors, you'll appreciate having the time you need to correct them.
CONSIDER PERSONAL CHANGES THAT OCCURRED IN '07
There's nothing more constant than change. Chances are you probably had some changes in your life last year that might affect your tax situation. For instance, did you refinance or sell a home? Do you have a new job? Did you exercise stock options or take significant capital gains? These events can impact your tax situation considerably.
How about changes in your family such as a marriage, divorce, or a new baby? Remember, you have to provide a Social Security number on your return for all your dependent children, even infants. Best to request a number from the Social Security Administration right away. On the flip side, a child who can no longer be claimed as a dependent can affect your taxes as well.
MAKE YOUR IRA CONTRIBUTIONS
You have until the April deadline to make last year's IRA contribution, but why wait? Preparing now will let you know how much you can provide and whether the contribution is deductible. If you haven't opened an IRA yet, you can take this time to consider whether a traditional or Roth IRA makes sense for you.
You also have until April to make last year's contribution to a Coverdell Education Savings Account if you're eligible. Just make sure to tell your account provider that the contribution is for 2007.
REVIEW EXEMPTIONS, DEDUCTIONS AND CREDITS
When it comes to money, it's not how much you make that's important, it's how much you keep. Be sure you're using all the exemptions, deductions and credits that are available to you.