Time is running short to get your taxes done, and many taxpayers will take the next few weeks to gather up their records and get a handle on their tax situation to prepare their returns. In order to get started, you'll want to make sure you have everything you need in order to do your taxes correctly. Let's look at five of the most important things to have pinned down before you begin your tax preparation process.
1. Form W-2
The most important form you need in order to prepare your taxes correctly is your W-2 from your employer. Not only does it have the biggest source of income for most taxpayers, but it also typically has the only source of money that's withheld from your paycheck to cover federal and other taxes. In fact, for those who file paper returns, the IRS requires that you attach a copy of your W-2 to your return. Few other information returns get this kind of scrutiny, but for many taxpayers who don't have other sources of income, the W-2 will be one of the only documents you'll receive.
2. Other tax information returns
The IRS typically doesn't require that you attach other tax information returns, such as Form 1099 for various types of income and Form 1098 for certain interest expenses, to what you file for the year. Nevertheless, having them handy can help you avoid common mistakes in including income and claiming deductions. In a few cases, these forms will include money withheld to cover tax liability, so you'll need to take those numbers into account in order to avoid overpaying on your taxes for the year.
3. Supporting information for items that aren't reported on official IRS forms
Just because you don't get a form in the mail from a financial institution or other source doesn't mean you can't claim a useful deduction -- or that you can ignore what the IRS would see as taxable income. What's especially important when you don't get an officially sanctioned information return is that you have your own documentation to support the position you take on your return. Again, you don't have to send it along to the IRS. Having it handy in case of an audit, however, can make your financial life a lot simpler.
4. A way to get the tax forms you need
One of the most frustrating things to discover at the last minute is that you need a form you don't already have in order to reduce your tax bill. Ensuring a reliable source for the information you need is important to keep the tax-preparation process from hitting a snag.
Fortunately, most tax-preparation methods make it simple to get additional forms. Those who use professional tax software can typically get access to every form they might conceivably need. Even if you still use paper returns, the IRS website includes an extensive forms database you can use to print off blank forms to include in your filing.
5. The right information on how to file
Finally, when your tax return is done, you'll need to know how to file it. The simplest method is to file electronically, and the service you use to prepare your return on an electronic basis can walk you through the process of what you have to do to get your tax information where it belongs.
If you use paper returns, you'll have to figure out where to send them by mail. The address depends on where you live and whether you owe taxes or will get a refund. Again, the best source is the IRS website, but you can also find information on the Form 1040 information booklet and other sources.
Trying to do your taxes at the last minute can be a harrowing experience, and it's even worse if you don't have everything you need to get it done. By taking care of these five things sooner rather than later, you can put yourself in a better position to get your return done right and on time in 2016.