How to prepare for tax time

Many students are privileged to have their parents take care of their tax preparation, and their only responsibility is providing a signature at the end. However, other students are left to deal with their own financial issues.

With tax season a few months away, here are some tips on how to start preparing for the stress of compiling documents:

  • Start a documents folder. Employers, charitable organizations, banks and other financial institutions begin mailing out tax forms from the previous year in early January. Individuals should keep their eyes open for any mail that appears to be tax-related. Store these documents in a folder that can protect any sensitive information. Such folders also make information more accessible as more and more documents arrive in the mail.
  • Begin collecting receipts and itemizing expenses. Many expenses are tax-deductible. These can include education costs, moving expenses, medical expenses and childcare costs. Store receipts and other documentation, including canceled checks, with the other tax documents.
  • Create a spreadsheet of important information. It is handy to have all financial information at the ready.
  • Decide on a filing option. Technology has made filing taxes much easier. Tax preparation software is available for those who choose to file their taxes themselves. There also are walk-in centers that will prepare tax-filing documents. Whatever method taxpayers choose, allow for ample time to gather information and get the taxes filed by the deadline. Leave some wiggle room in case one filing method doesn’t work out.
  • Start saving money. Although the goal is to get a refund each and every year, taxpayers sometimes owe money, which can be troublesome for those whose budgets are stretched thin already. Those who owed money in the past should begin saving money for tax expenses as early as possible.
  • Develop a good filing system. Many financial professionals will advise people to keep financial records for 7 years. Any tax documents should be kept together should they need to be referenced. Designate a filing cabinet or a box specifically for tax documents.

Tax filing season is right around the corner, and the dawn of a new year is a great time for men and women to start gathering documents and preparing their returns.