Fall is the time of year that brings cooler weather and the chance to get outside, clean up the lawn or organize the garage or attic. The Internal Revenue Service wants to remind taxpayers that fall is also a good time to conduct a review of their tax situation. Take into account the latest tax changes, check your withholding status and start organizing your records. Remember to avoid any unsolicited e-mails claiming to come from the IRS–don’t become a victim of internet “phishing” scams.
“A careful study of your income and expenses for 2012 may result in a bigger refund or less taxes to be paid come tax time next year,” said Clay Sanford, an IRS spokesman in Dallas. “Of course, if you itemize deductions on your next tax return, you’ll need to keep documentation–so, it only makes sense to start good recordkeeping habits. And, to be knowledgeable of the credits and deductions for which you may qualify, be sure to visit IRS.gov, frequently.”
Take a few minutes to check your withholding to make sure what is being taken out of your paycheck matches your projected taxes. If not enough is withheld, you will owe tax at the end of the year and may, in some cases, have to pay a penalty. If too much tax is withheld, you will lose the use of this money until you get your refund.
You should check your withholding if there are significant personal or financial changes in your life. Many of these changes involve the addition or reduction of exemptions or a change in filing status that alters the tax liability, even if there has been no change in income. These changes include: marriage, divorce, birth or adoption of a child, purchase or sale of a new home, or retirement. Other changes that can alter the amount that needs to be withheld include taking a second job, having a spouse go back to work, or receiving income not subject to withholding, such as rent, dividends, interest or capital gains.
Look for the “Withholding Calculator” on IRS.gov. With the help of current pay stubs and a copy of last year’s tax form, users can check to see if they are withholding the right amount. Information from this automated calculator can then be used to revise a W-4 to give to your employer.
“You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year,” Sanford added. “Just a little effort in this regard during the year saves you time and work when organizing and completing your return.”
In most cases the IRS does not require you to keep records in any special manner. Normally, you should keep all documents that may have an impact on your federal tax return. Such items would include bills, receipts, invoices, mileage logs, canceled checks–or any other proof of payment–and any other records to support deductions or credits you claim on your tax return.
Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs and business or rental property, should be kept longer. For more information on what types of records to keep, see IRS Publication 552, Recordkeeping for Individuals