As a new year begins, it is a good time to get organized and start fresh. This includes preparing for your taxes. While it may be tempting to wait until the last minute, especially if you owe money, this does not mean that you should not be prepared. Consider these benefits of organizing your taxes now.
Organizing your taxes early does not mean you have to file early, but being prepared will make tax time easier and less stressful. By collecting all of your pay stubs, receipts and other tax-related paperwork ahead of time, you can avoid feeling rushed to find everything you need. While you are organizing last year’s taxes, get prepared for the coming year by setting up a file system where you can keep next year’s tax paperwork. This way you will already be organized for next tax season.
Knowledge is Power
By organizing your taxes early, you will know if you owe taxes or are getting a refund. If you owe money, it is better to know this early so that you can start saving money rather than scrambling for it at the last minute. If you are getting a refund, then you might want to file your taxes before the deadline so that you can get the refund even sooner. However, before you file, check with your lawyer or accountant to see if there are any benefits to waiting before filing early.
Things Get Lost
Being ready for your taxes early allows you time to gather together any missing documents or information that might get misplaced. While your W2 forms should arrive by the end of January, these can get lost in the mail. If you have moved more than once or had multiple employers, there is a risk that your W2 forms could get lost. Knowing that these are missing earlier will give you plenty of time to track them down and avoid having to file an extension because of missing paperwork.
Collecting Your Deductibles
If you own a home, run your own business or worked from home as a freelancer, you will have all kinds of deductibles you can claim. From mortgage interest to personal property taxes to the office supplies you used in your home office, these are all deductions you might be able to claim. You can also deduct the items you donated to charity or the miles you drove to volunteer. The key to these deductions is having the paperwork to prove it, so preparing early gives you plenty of time to get organized and be ready well before April 15th!