The best way is to arrange your financial papers so information is quickly and easily available. It's not as hard as it seems, and the effort is definitely worth it.
Organization is the key. Two simple steps will:
Set aside a file, carton or drawer at home. Use this to hold all returns and tax information for the current year.
During the next few weeks you will be receiving forms and information from many sources. The most common are from employers (W-2), banks (interest statements - if paid to you, 1099-INT, and if paid by you - such as on a mortgage - 1098), from stock brokers (dividend statements, 1099-DIV, or statements of proceeds - such as from sale of stocks - 1099-B) or from your pension plan or IRA (W-2P or 1099-R). There are also documents you have been saving all year for business expenses or expenses on rental property. Keep all these papers together in the area you've set aside.
While it's a good start keeping your important papers in a safe, accessible place, you can free your mind, time and energies to do more interesting things, by spending a little extra time now.
When you've gathered all this year's papers in one place, you are ready to quickly sort and organize them.
Start by placing all similar documents in separate piles. Then, for each pile, list the type of document and then each separate piece of information. For example, for interest received (1099-INT) put the name of the bank and the amount received. If you sold stock (1099-B) you should list the name and number of shares sold, the date of purchase and of sale, how much you received on sale and what you paid originally.
If you have a column of numbers it is best to add it now. This can then be double-checked when preparing your return.
Finally, attach the documents to the list so you can locate the original information, if necessary.
What you've just done is take a set of papers which were randomly received, and put them in a form which is logical, practical and accessible.
Whether you now prepare your own return or have a tax professional assist you, the necessary information will be available when you need it.
Chet Greenspan is a practicing attorney and tax consultant in Forest Hills. He has been preparing tax returns for individuals and businesses for more than 10 years.
e-mail AttyChetTL@aol.com
Phone: (718) 520-1919 FAX: (718) 520-8965
116-16 Queens Boulevard Forest Hills, New York 11375-7061
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