Forex

There are still a couple of months left until the April 15 income tax filing deadline. But why wait until the last minute to get your affairs in order? By preparing now, you'll make your and your accountant's life a lot easier come crunch time.

In this article, we'll give you 10 actions you can start right now to make sure that you have the right documentation and information necessary to file a timely and accurate tax return.

1. Collect Your 1099s and W-2s
Employers typically send W-2 wage information to their employers via regular mail by the end January. About this same time investment firms will send out 1099s as well, detailing any stock or bond sales you've transacted over the course of the past year.

Do yourself a favor: review these documents closely! Make sure the withholding amounts are accurate. Also make certain that the gross wages reported on the W-2 form match what you've earned. If for some reason there is a discrepancy, contact your human resources or payroll department as soon as possible, and make sure they re-issue you a corrected form.

Make sure to review each transaction on your 1099s carefully. Check that the proceeds reported on the document match your records. In addition, be sure to find out the cost basis of the securities you've sold so that when it comes time to file your return, you'll have all of the information ready to go for when your tax returns are prepared. Incidentally, if you've earned any income from an international source be sure to save bank deposit slips and/or other records that tally the income earned. Because even though the employer is based outside of the United States, those wages must be reported on both your federal and state returns. In addition, income taxes may be due as well. (How do I figure out my cost basis on a stock investment?)

2. Collect Copies of Bank or Brokerage Statements
Suppose your accountant is reviewing your checkbook, and notes that in June of last year you deposited $1,000. He or she might make the assumption that the deposit was earned income (as opposed to a gift you received from a relative). But by having your monthly statements available you'll be able to show the accountant that indeed the transaction was a one-time gift, and shouldn't be taxed.

Brokerage statements come in handy because they often contain data that may alert your accountant (or you) to any tax-loss carry forwards you might have from last year, as well as provide an idea about what types of gains and/or losses could be realized in the current tax year. (To read more about this gain/loss issue, see Capital Gains Tax Cuts For Middle Income Investors.)

3. Set Aside IRA Contribution Proofs
In 2007, taxpayers under 50 years of age are allowed to contribute $4,000 per person to their IRAs. Those over 50 may contribute $5,000. With that in mind, taxpayers should set aside proofs of this contribution (preferably in the form of a cancelled check or brokerage statements). The purpose is to provide proofs of the contribution to your accountant, and to make certain that you are receiving the appropriate deduction. (Find out more about your retirement plans and taxes in IRA Contributions: Deductions and Tax Credits and How IRA Contributions Affect Your Taxes.)

In 2007, single taxpayers earning up to $53,000 and married taxpayers filing jointly earning up to $85,000 can deduct the entire $4,000 contribution. Beyond that, partial deductions are permitted for individuals earning up to $63,000 and married couples earning up to $105,000. But again, unless you have and can provide proofs of the contribution you'll get nothing.

4. Find Social Security Information For New Additions To Your Family
Be sure to provide your accountant with the social security number of any children that you had or have adopted over the past year. Why? Because if you earn under $75,000 as a single taxpayer or under $110,000 as a married taxpayer (married filing jointly), you are eligible for a $1,000 tax credit for every dependent child that you support under the age of 17. But again, unless you provide your accountant with that information you won't receive the credit.

5. Gather Work Related Receipts
If you purchased an item (such as a uniform) that you need for your job and your employer does not reimburse you for that expense, then the item is deductible. In addition, if you are self-employed, many items you use to conduct or promote your business may be deductible as well.

Incidentally, deductible items for the self-employed typically include:

* Computers
* Desks
* Manufacturing equipment
* Tools
* Advertising fees
* Electricity
* Gas

In short, save all receipts regardless of whether you are an employee or are a business owner; if there is a question regarding the deductibility of a given item, ask a tax professional. Again, documenting your purchases is key. (If you are self-employed, check out Don't Overlook These Broker Deductions for more business deduction tips.)

6. Save Pictures, Receipts or Records of Charitable Donations
Both the federal government and the IRS encourage individuals and corporations to make donations to charities by offering deductions for donated goods. However, receipts detailing the items donated must be saved and included with your tax return. And while formal pictures are not required, they are highly recommended because they will substantiate the deduction if it is challenged by the IRS during an audit. (To continue reading about this subject, see Deducting Your Donations and Gifting Your Retirement Assets To Charity.)

This means that all individuals need to obtain receipts or proofs of donations for any items placed in Salvation Army bins, church baskets or to any other certified charitable organization. Incidentally, collecting these receipts well ahead of the April 15 deadline makes a lot of sense because if your proofs are insufficient, or if you've forgotten to obtain a receipt for a particular donation, you'll have plenty of time to contact the organization and obtain the necessary documentation.

When it comes to monetary donations to charities, make sure that you keep the relevant bank record relating to the donation. According to the IRS, acceptable bank records include canceled checks, bank or credit union statements, and credit card statements. Other records of a cash donation (such as personal notes) are no longer acceptable as suitable proof.

7. Gather Mortgage Receipts
While your mortgage company will provide you with a 1099 detailing the interest you've paid on your loan throughout the year (which is deductible), saving individual mortgage receipts also makes sense. Why? They can be used to reconcile the year-end 1099 (in other words to check its accuracy) and provide your accountant with some sense of the size of interest deductions that might be realized in the coming year. This allows for better tax planning. (To learn more, see Paying Off Your Mortgage, Understanding the Mortgage Payment Structure and Mortgages: How Much Can You Afford?)

8. Gather Proofs Of Purchase For Energy Efficient Goods
If you purchased a hybrid vehicle after January 1, 2006 you may qualify for a tax credit ranging from $400 to $3,400. In addition, if you've purchased certain energy efficient items for your home including insulation, hot water heaters, furnaces, boilers or thermostats you may qualify for up to another $500 in tax credits. Again, set aside your proofs of purchase and be prepared to present them to your accountant come tax time. (To read more about home expenses, see Downsize Your Home To Downsize Expenses.)

9. Tally Co-Pays
Most employees have the cost of medical insurance deducted from their paychecks on a pre-tax basis. Therefore, these amounts cannot be deducted again on your tax return. However, any doctor or hospital bill that you co-paid throughout the year is deductible and should be itemized on your return. Save your receipts!



10. Locate Last Year's Tax Return
Before completing your taxes this year, be sure that both you and your accountant review last year's tax return. Why? The return will provide (both you and your tax advisor) with a wealth of information that can be valuable to this year's return, including:

* Tax loss carry forward information
* Withholding information
* Information about how certain income may have been treated, such as capital gains or traditional income

Not surprisingly, most taxpayers neglect to go over last year's return. But it is worth the time because very often you'll find a carry forward or some other nugget of information that might be beneficial to this year's return. (To read more simple tips about wrapping up last year to ready for this tax year