By now you should have received your W2 or 1099 forms for all the work you’ve been paid for in the past year, more than $599.99, and other forms of income. That’s right it’s tax season. So why would a tech article talk about taxes? Today most taxes are submitted electronically by either the taxpayer or a tax preparer.
There are several things you can do to electronically prepare your taxes. First, I recommend scanning your documents into a PDF format, or downloading them from your employer’s website, or other places you get tax documents. The IRS accepts electronic documents and making your documents electronic is a great way to organize them, not lose them, and reduce the chance of them getting destroyed.
If you itemize anything at all on your taxes, you know you need to keep receipts for certain purchases to deduct them. If you have receipts from stores to support those expenses, be sure to digitize them, soon after you get them, as they will inevitably fade over time. My accountant loves to receive electronic documents, because the first thing she will do anyway is to digitize her clients paper documents.
The best way to organize your digital files, is to start by making a folder on your computer named 2017 Income Taxes. Then create three sub-folders: “Supporting Documents,” “Federal Income Taxes,” and “State & Local Income Taxes.” In the Supporting Documents folder, put a copy of each tax form. Be sure to use file names that descriptive enough so that you and/or your preparer know what they are. Use file names like “W2-WidgetsRUs-YourName,” “1099-DIV-First_National_Bank_Stock,”
“2017_Real_Estate_Tax_Bill-street-address,” etc. In the Federal Income Taxes folder, put a copy of your filed federal taxes, and in the State and Local Income Taxes folder, put copies of those filed tax forms. If you own a business, you should put all the supporting documents into a subfolder of your Supporting Documents folder.
After tax season I suggest making a CD-ROM with all that year’s tax files. Take that CD and place it somewhere safe, like a safety deposit box or heat and fire proof safe, that family members know how to access in case something happens to you.
There are several options for e-filing your taxes. TurboTax and H&R Block both have desktop software and cloud-based programs. Filing costs range from free for federal filing, to costing you some money based on how complicated your taxes are. Both make audit protection statements. They work by guiding you through a set of interview questions. Currently TurboTax is offering the ability to talk with a Certified Public Accountant (CPA) about your finalized return.
Some independent CPA’s or agencies offer online programs developed by the company they get their tax software from. My accountant, Dawn James, CPA, has a website called “DIYTaxesMadeEasy.com,” that uses the Drake Tax Preparer software. Dawn offers a free consultation about the taxes prepared on that program. These professional tax preparer online programs are just as easy to use as TurboTax and H&R Block.
That said, if you have complicated tax issues, I highly recommend that you use a CPA and provide them the files electronically.
Many employers are using a program for W2s that allows the tax preparer to bring in the data electronically into their programs, which reduces errors. Check with your employer to see if they offer that option.
In Maryland, you can use the tax program on the State Comptroller’s website to file your taxes. It is very easy to use. Check to see if your state or locality has a similar site if you live outside Maryland.
Once you have filed this year’s taxes, go ahead and set up the file structure for your 2018 taxes, and scan documents as the year goes along, to make tax preparation easier next year.