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The Clock Starts Now!

Posted on January 23, 2017 at 2:00 PM by State Savings Bank

2017 tax season begins today! Did you know that roughly $1 billion in additional revenue is generated each year from tax errors? To ensure that you don’t end up paying more than you need to in taxes, it is important to stay organized when filing before the April 15 deadline, but also as you collect statements, invoices, and receipts throughout the year. We will be covering one particularly simple and efficient organizational method:  the three-folder system. 

Folder 1: Income

Make a list of all your income sources (jobs, investments, interest from rewards accounts, etc.) and keep those documents in this folder. Once your W-2 and 1099 forms arrive, double-check their accuracy and tick them off your income source list.

Folder 2: Deductions

Keep track off all your applicable deductions throughout the year. Part of this is already being done for you through a W-2 if you’re a salaried worker. However, if you donate to charities frequently, participate in any kind of tax-exempt activity or conduct freelance/contract work, this folder is important! According to TurboTax, there are numerous tax exemptions available to people that get overlooked regularly. For instance, there could be tax exemptions for moving expenses to begin your first job if you moved more than 50 miles or for refinancing your mortgage.

Folder 3: Investments

This folder includes any monthly, quarterly or annual statements, as well as purchase receipts, sale confirmations and dividend notices from investments you made throughout the year. If you have several types of investments subject to tax, try creating separate folders for different categories. Example: a folder for deductible or tax-deferred investments, which include Roth 401(k) accounts or IRAs and another folder for taxable investments like stocks and bonds.

The fastest way to get your refund is to file early. If you do it yourself, pick the e-file option, and ask for direct deposit, which is guaranteed to arrive in your bank account within 21 days. If you use a tax professional, schedule an appointment right away. If you prepare by organizing, filing early, and taking advantage of the deductions available to you, you will avoid paying unnecessary taxes.

Categories: Tips and Tricks

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