Dear Carrie, I always put off doing my taxes until the last minute and then I'm never sure if I'm doing them right. How can I make this process less painful? --A Reader
Dear Reader, Doing your taxes can seem like a huge chore, but for many people, it's really a simple process. The key is a little upfront organization. That way, whether you're using an online tax prep program or old-fashioned paper and pencil, you'll have the information you need handy and can plug in the numbers.
Even if your financial situation is more complex and you need the help of an accountant, being prepared can save you time and money.
Have identification numbers handy
While this may seem obvious, not having all the necessary Social Security or other tax ID numbers handy can be the first frustration when sitting down to do your taxes. If you're single, no problem. But if you're married and have dependents, make sure you have all of their Social Security numbers in front of you before you get started. You'll also need their birthdays.
Collect documents that show your earnings
There are different forms to designate different types of income. If you're an employee and your regular job is your only source of income, the only form you'll need is your W-2 from your employer. This will show what you've earned and the taxes you've already paid through withholding.
However, if you have other income, for example from interest, dividends, capital gains, freelance work or Social Security, you should also receive 1099 forms that show how much you've earned. These forms are sent to the IRS by the issuing institution, so it's important that you report all of this income, no matter how small the amount.
Companies are required to mail these forms by the end of January each year. If you don't receive them sometime in February, make an effort to follow up.
Even if you don't receive an expected 1099, be sure to include the income on your tax return.
And if you received income that won't be reported on a W2 or 1099, such as self-employment income or alimony, you're not off the hook. You also need to include this income on your return. Best to have some sort of written documentation, whether it's a bank statement or your own records.
All this adds up to your gross income.
Gather documents that reduce your income
Get the Market Movements in Advance: William's Edge Webinar for Monday, March 10th, 2014 | John Ransom