How to Prepare For Tax Season in January

Tax season is over and I was just amazed to see the same long lines at the post office from last minute tax returns.It is neither prudent nor stylish to leave your tax issues to the very last day of tax season.It can both stressful and the chances are very high that you will make mistakes in your returns.It is not uncommon to file late and forget to sign your tax returns as you rush out of the house to the post office. One needs to prepare for their tax filing early.

It is easy for you to manage your tax filings for the next year by simply starting the process in January. For example for your 2008 returns simply following the steps outlined before will save you more tax headaches than buying the latest tax filing software.

1. Do your annual Net worth Statement

It's very easy to do. Figure out how much you own and subtract how much you owe. It is as simple as figuring out the market value for your house then subtract the mortgage in your property. It is amazing how many people have no clue what their net worth is. Yet it is essential as it allows you to know exactly where you stand in your finances and where you need to improve. Simply having a big SUV does not mean that you are wealthy.

2. Determine your Financial Goals for the Year.

No, I did not say your new year resolution. Exactly what are your financial goals for the year? If you wish to pay off your car note, exactly how much is it? Give it a number and write it down. Write down your exact financial goals and you shall find yourself working towards fulfilling them.

If you continue having new year resolutions, you will continue breaking them.

3. Organize Your Documentation

Shoe boxes are out of fashion. Go to staples and buy file folders for less than $50 . Now organize them into folders to hold your 1099's, W-2 forms and other tax related documents.

Make sure you also have the folders set up as either personal or business expenses. It only takes 5 minutes of your time to file your day's receipts in the required folder.Set up the folder in terms of monthly sub folders. You will be surprised at how happy your accountant will be with you come tax time.

Next time you go home, don't rush to the kitchen first, remove your receipts from your purse or pocket and file them in the required folder. If there are any business receipts, do the same. That tip alone would save you a whole month of looking for lost receipts in a shoe box or shopping bag.Who has never lost a receipt?

All this just takes a short time in a day and you are ready for the tax man for the rest of your life. Good luck and remember that even though we are already past January, it is never too late or too foolish to start dealing with the next period's taxes.

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By: Tony Rich
Published: 04/20/08