Preparing for Tax Season

The New Year has begun and that means an opportunity for a fresh start. However, before taking advantage of the clean slate that the first quarter can offer, bringing the past year's businesses to a suitable close is often a good idea. Much to the dismay of some consumers, this means closing up the financial year and preparing to file taxes; the time to pay Uncle Sam is almost here—and if you're not sure how to prepare, the situation can quickly become overwhelming.

Fortunately, arranging all your personal financial records in just the way the Internal Revenue Service (IRS) wants to see is not as difficult as it may seem. While some may have to spend a bit more time digging than others, it is a worthwhile effort that will not only make this tax season easier, but will prepare you to take control of your records and stay organized for filing taxes in the future.

Gather Your Papers
During the first few weeks of the year, you'll likely receive documents from your employer for use in filing your income taxes. These documents fall into two major categories: W-2 forms and 1099 forms. Between the two of them, they contain all the information you need in order to fill out necessary IRS paperwork. Not only is it important to make certain you receive these documents and pursue them if you have not, but also that you keep them somewhere safe.

Organize Your Files
Any record of money earned or money spent from the past year is important to have on hand; split any and all you have saved into income and expenses. Then divide those groups up further by relevant type. For example, income records can be divided up into groups for paycheck stubs, records of freelance or commissioned work, jury duty payments, and any other sources of money made. Expenses will differ by situation, as will how many tax deductible payments you made over the course of the year. Examples of deductible payments are retirement investments, utility and medical bills, and childcare.

There are thousands of possible deductions. To see which apply to you, ask your local IRS representative for current tax law documentation or check the official IRS Web site.

Label and Store
Once you've neatly organized as many of your financial records as possible and recorded the totals of both your earnings and expenses, store your documents in their organized groups in labeled folders, files, or envelopes. This is your first step toward becoming more organized in the New Year. Go ahead and create two folders for each category you assigned—one for this year and one for last. In the coming months, each time you earn or spend, store your documents accordingly. Doing so will make next year's preparations that much easier.

Interested in more tips about managing your personal finances? Check ‘n Go is here to help. We're a leader in the payday loan and cash advance industry with hundreds of articles on how to make your financial situation easier to manage—during tax season and all year long. Take a look at Checkngo.com.