Get a head start on 2010 taxes
Sure, you don’t really have to deal with 2010 tax returns until next spring (unless you’re Wesley Snipes). But I’m a big proponent of getting organized early. Giving yourself plenty of time to gather all the necessary paperwork and research potential tax deductions and credits minimizes stress and the likelihood that you’ll misplace important records. And if you use a tax preparer, you’ll save money by making it easy for your CPA to access your documents, reducing your by-the-hour bill.
Here’s what you can do now to make tax season a little less hectic. You’ll thank me come April 15th!
1. Decide whether to itemize deductions. There are two ways to take advantage of tax deductions, the expenses the IRS allows you to deduct from your taxable income. The simpler way is to take the standard deduction, a fixed dollar amount that Congress allows most taxpayers to subtract from their income. For 2010, the standard deduction is $11,400 for married couples filing jointly and $5,700 for singles. The other way to take a deduction is to itemize your deductible expenses (see the list in step #2). The only reason to itemize is if those expenses total more than the standard deduction. It’s good to decide now what you’ll do so you have time to gather all your receipts, which you’ll need if you get audited. (Learn more about itemized vs. standard deductions on IRS.gov.)
2. Gather your paperwork. If you choose to itemize deductions, these are the records to have handy: work-related expenses, charitable donations, child or dependent care, unreimbursed medical expenses, mortgage interest statements, losses due to theft and disasters, and any other proof of deductible expenses. (See a full list of deductions on IRS.gov).
3. Look into tax credits you’re eligible for. Tax credits are even more valuable than deductions. Rather than subtracting from your taxable income, they reduce the amount of your actual tax bill. There are tons of credits out there—relating to dependents, education, income, childcare, and even energy-efficient home improvements—but it’ll take time to research which ones you’re eligible for. Start now to make sure you don’t miss out on money that’s yours. (The Tax Savings Tool on WhiteHouse.gov is a good jumping off point.
Do you use a tax preparer or prepare your own taxes?
