Getting organized for the tax year
interest in your other assets
Wage income isn't the only earnings that the
IRS taxes. Are you saving money for your child's
college, a new house or retirement? Good for
you -- and the tax man. Interest earned on
most savings accounts is taxable.
You should get statements from
each of the account holders as well as official
tax forms. Copies of the forms also go to
Interest earnings are typically
documented on 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 a broker,
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
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
onto 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 rental income, and
that means less of your investment property
earnings is 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
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 benefits are taxable.
You'll get a separate Form 1099-G for this,
so it needs to go into your filing preparation
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, 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.
If you made an extra mortgage
payment at the end of last year to up that
interest amount, make sure it's counted. Sometimes
lenders use automatic reporting programs that
overlook extra payments. You can still claim
the extra interest. Just make sure you document
it in case the IRS follows up.
Mortgage interest isn't limited
to your primary residence. If you have a vacation
home, interest on that loan will be on a separate
Form 1098 -- and it is just as deductible.
And don't forget the
interest you paid on a home
equity loan. Your year-end loan account statement will tell you how much this
was, and in most cases it's deductible on your Schedule
First-time homebuyers get an
added bonus. Eligible buyers of a primary
residence can claim a new tax credit of up
to $7,500. The credit is available on homes
bought after April 9, 2008, and before July
1, 2009. The credit, however, must be repaid
over 15 years.