Welcome to 2021! That means that the 2020 fiscal year is over. While there’s nothing fun about filing tax returns or paying taxes, taking steps in January to organize your paperwork could help you avoid getting frustrated, frazzled, or befuddled come tax time. Here are 5 things you can do now:
1. Make a copy of last year’s tax return and attachments. With this to guide your tax prep, you’re less likely to forget a source of income or a deduction.
2. Collect the tax IDs you’ll need. This includes your dependents’ Social Security numbers and the SSN of anyone you employed (e.g., a babysitter, housecleaner, or nanny).
3. Create a file folder labeled “Income”. Use this folder to organize the following tax forms you should receive in January or early February:
- W-2s and 1099-MISCs from employers
- 1099-INTs reporting interest income and 1099-DIVs for mutual fund or stock dividends
- 1099-Bs reporting brokerage transactions
4. If you typically itemize your deductions, start another folder labeled “Deductions”. Some of the information that goes here will come by mail; the rest you may need to supply yourself.
- 1098s reporting interest you paid on mortgages and equity loans (also real estate taxes, if included in your monthly mortgage payment)
- A receipt for real estate taxes if you paid them yourself
- A copy of your W-2s showing state and local income taxes you paid
- A receipt for personal property tax from your town or the taxing authority
- Receipts for charitable donations, including mileage
- Receipts for medical expenses, including mileage
- Receipts for bills incurred while job-seeking
5. Rev up your retirement saving. There’s still time before the April filing deadline to contribute to a Traditional IRA or Roth IRA. For details, search “IRA Contribution Limits” at www.IRS.gov. Don’t have an IRA yet? Ask us about our insured IRA options.
Compass Community Credit Union does not provide tax advice. We recommend consulting a qualified tax professional to determine how tax laws may apply to your situation.