Tax Planning: A Good Move
By Geoff on Nov 25, 2008 in Credit & Debt, Money Management
Every year, many people have stated that they wish they had better planned for taxes. It’s a fact that no one wants to be doing a last minute rush job during tax time, so tax planning is essential.
For your whole year to flow smoothly, you need to sort out your tax situation early. This is what tax planning is all about. Instead of being in a situation when you’re desperate for deductions to avoid paying the IRS, you could plan well, and get all your tax benefits in order. Once your taxes are wrapped up for this year, you should start planning for the next year. Following are some tips to help you along the way:
1. Valid social security number
In order for you to claim earned income credit or to claim other credits for your children, everyone will need to have a social security number. Even newborns will need one in order for you to claim. You can start to do what you can to expedite the process even during pregnancy, if you know you want to claim your child for the next tax return.
2. Get your tax forms in advance.
Employers are required to give W-2 forms to all their employees by the end of January. Freelancers will receive the 1099 form from their clients, which lists the amount of income they got from them in the past year. Even interest earned from bank accounts of investments will require a 1099 form. Getting all these forms will help you file your taxes properly.
3. E-file your taxes.
In this modern day and age, most people either have a computer or at least have access to one. In fact, the IRS recommends the use of electronic methods, rather than paper return submissions. Electronic filing is easier and faster. When you send in your paper return, IRS has to key in the numbers into their computer system anyway, and if you e-file, they will save time and also human errors.
4. Set up a home office.
If you have your own business, a home office is a good way to deduct some expenses from your taxes. Even if you’re just planning to start your business, it’s always a good idea to plan the home office early, too. The home office deduction can benefit you greatly, but you need to meet certain requirements. Your home office must be used for business only, then you can claim on the money spent for equipment, and even a portion of your mortgage/rent and the utilities bill.
5. Keep your records in good order.
Don’t just throw all your stuff into a box. It will be a nightmare when you need to file your taxes. If you already have an idea about which deductions you can qualify for, then keep your records in good order from the start. For example, if you have a business car, keep track of the mileage. If you give to charity, you will need a receipt from the receiver and a document verifying appraisals, especially if expensive goods are involved.
Take a little time to keep your records in order, and enjoy a hassle free tax time.
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Posted by: Geoff Caplan
http://marketing-tech-news.com
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