Take Stock of Your Tax Records

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The beginning of every new year means one of life’s certainties is just around the corner. No, not broken resolutions…income tax time!

Are your financial records in better shape than those tattered resolutions? If not, here are seven easy steps to help you “take stock.”

Step one: Find your 2002 income tax return. Use it to identify the information you’ll need to gather in order to complete this year’s return.

Step two: Dig out your 2003 records, organize them by type and file them in a folder. Some common examples of things to collect:

  • Pay stubs
  • Bank statements
  • Brokerage reports
  • Auto mileage logs
  • Doctor, dentist and prescription receipts
  • A list of alimony payments
  • Income and expense records for farms or other businesses
  • Stock sale confirmations
  • Unemployment compensation records
  • Social Security deposits

Step three: As you receive 2003 year-end forms, toss them into the folder containing your other records. Documents to file include wage statements (Forms W-2) from your employer, as well as Forms 1099, which show interest, dividends, unemployment compensation, gambling winnings, social security, pension distributions and other income.

Step four: Once all your official forms have arrived, use a calculator, an adding machine, or the spreadsheet program in your computer to check the totals of the individual records against those shown on the forms. Clear up any discrepancies.

Step five: If you plan to prepare your own tax return, purchase a software program or choose an on-line e-filing web page. You may even be able to e-file for free at the Internal Revenue Service site (http://www.irs.gov/app/freeFile/welcome.jsp). If you’d rather let someone else do the work, deliver your very-organized records to your favorite tax specialist.

Step six: When your return is finished and mailed, store your copy in an easy-to-find location. This is also a good opportunity to designate a file for collecting your 2004 records so you’ll be a step ahead next January.

Step seven: Congratulate yourself for getting the annual “taxing” chore finished early. And now that you’re done with the stressful stuff, there’s plenty of time to take another look at those resolutions.

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