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Tax Toolbox

 

Doing your taxes can be less frustrating, less time-consuming and less costly if you're prepared.

Getting organized is the first step in filing your taxes
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If you're self-employed, you have a bit more work to get organized. Track down all receipts and documentation for business-related expenses, from the mileage records you kept when using your car for business to the office equipment and supplies you bought to the utility bills you paid to keep the home-office lights on.

IRS interest in your other assets
Wage income isn't the only earnings that the IRS taxes. Are you saving money for your kid's college, a new house or retirement? Good for you -- and the taxman. Interest earned on most savings accounts is taxable.

You should get statements from each of the account holders, as well as formal tax forms. Copies of the forms also go to the IRS.

For interest earnings, these documents are typically Form 1099-INT.

If you've branched out into stocks or mutual funds, you should get a Form 1099-DIV for each stock, mutual fund or money market account. Reports on the proceeds from broker transactions, if you use one, will be sent to you on a Form 1099-B.

Just like with your final paycheck stub, hang onto your year-end financial statements to compare with the official final tax documents.

That pesky miscellaneous income
Did you get a state tax refund last year? Did you rent out that old house you fixed up? Did you finally settle into retirement thanks to those monthly pension checks? There's a place for each of these on your tax return, so start getting this paperwork in order, too.

State and federal tax collectors work together. In the case of state tax refunds, that means the Form 1099-G you get detailing your refund also goes to the IRS, so hang on to your copy and report it.

Rental property can provide a nice boost to your balance sheet. But make sure you keep track of all it cost you to keep your tenants happy. These expenses can be used to offset your rent income, and that means less of your investment property earnings are taxable.

Some retirement payouts are taxable, at least in part. To help you determine exactly how much you owe you'll get a Form 1099-R showing how much was paid to you during the year.

But what if it wasn't such a good year financially, let's say you were out of work for a while and collected unemployment. Sorry, but unemployment is taxable. You'll get a separate Form 1099-G for this, so it needs to go into your filing preparation package.

Tax trimming starts at home
OK, you know what information you'll need to report your income. Now it's time to do the pre-filing preparation that could help you trim the taxable amount.

Costs related to your home are a good place to start.

Homeowners know the value of a mortgage. Not only does the loan get you into your house, but the interest you pay on it is deductible. Your lender will send you a Form 1098 with this amount. You can check out your loan amortization schedule and get an idea of just what the deductible interest amount will be.

-- Updated: Jan. 2, 2006
 
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