Day 1 Gather All Your Paperwork

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GET ORGANIZED!

Considering that most of us wouldn’t put doing taxes on a list of our favorite hobbies, the less time we spend doing them, the better. That’s where this bootcamp comes in. Follow these steps, and we promise your taxes will be a breeze this year.

When you start, you want to be as prepared as possible. That requires two things: figuring out your filing status and getting all your paperwork together.

Term Sheet

• W-2 form
  n. The form that an employer must send to each employee and the IRS at year’s end. It details the amount paid in wages to the employee, as well as taxes withheld.
• W-4 form
  n. A form completed by an employee that informs the employer of the employee’s exemptions and status, so the employer knows how much tax to withhold from each paycheck. It is normally filled out when an employee begins a job but can be changed any time his or her tax situation changes.
• Filing status
  n. A category that determines the taxpayer’s filing requirements, standard deduction and eligibility for certain credits and deductions. It is usually based on marital status, number of dependents you have and other factors, and it determines which tax bracket you fall in.
• Individual Retirement Account (IRA)
  n. Investment vehicles used by individuals to set aside and earn money for retirement savings.

Why IT MATTERS

If you’re not organized, you could miss tax savings—and lose money that is rightfully yours. Doing it right the first time around also prevents you from having to file an amended return, which is more time, money and hassle.

• While the Internal Revenue Service (IRS) will correct your math errors, you will have to file an amended return if you make a mistake with any of the following: filing status, dependents, total income, deductions or credits.

• An estimated 2.2 million people had to file amended returns in 2002.

WHAT YOU NEED TO KNOW

Filing Status

Your filing status will determine which tax bracket you fall in, and is determined by your marital status, the number of dependents you have and some other factors.

These are the five types of statuses:
1. Single individual (unmarried with no dependents)
2. Married person filing jointly (married, filing taxes together)
3. Married person filing separately* (married, but filing separate tax returns)
4. Head of household (unmarried, have cared for a dependent more than half the year and paid more than half the cost of maintaining a home)
5. Qualifying widow(er) with dependent child** (used in the two years after your spouse dies as long as you did not remarry and you have a dependent child)

*If You’re Married …

If you’re married and debating whether to file jointly or separately, you should keep in mind that filing jointly generally provides more tax benefits. Separate returns might make sense in certain situations—for instance, it could make sense if one spouse has little income but a large amount of itemized deductions, such as medical expenses. Other couples who file separate returns include those who want to protect premarital assets or those who want to keep their incomes separate for a specific reason. But those who file separately are not eligible for as many deductions and credits, usually outweighing the benefits of filing separately.

**If You’re a Widow or Widower …

If you are a widow or widower, you can file a joint return the year of your spouse’s death. For the next two years, you can use the Qualifying Widow/Widower with Dependent Child filing status if you have a dependent. After that, you should file as a single individual or as head of household.

Paperwork

The information you need to gather falls into these large buckets. If you’re confused by anything on this list, don’t worry. We’ll get to the comprehensive list in the next step.

• Your personal information
• Information about your income and adjustments to your income
• Receipts of expenditures that could lower your taxes
• Taxes you’ve paid, so you don’t pay more than you should
• Information on wages paid to household employees
• Other tax payments
• Your bank information, so you can receive direct deposit of a refund, or pay your taxes directly from your account

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