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How to Prepare for Tax Season

Tax season? Already?! January is the perfect time to get a head start on creating a smooth tax preparation process for yourself. The good news is that it really isnít that hard Ė if you get organized now.

Here are 5 things to remember:

  1. Itís just like cleaning the garage. If you do it regularly, itís not overwhelming. And no one else can really do it because no one else knows what that brown box of bolts is supposed to be used for.

    Keep track of your expenses so a tax advisor (or you can look it up yourself) can determine what types of expenditures can be deducted. Even if you donít usually itemize, finding out what you could deduct will help you make sure youíre making the right decision.

  2. Think of your taxes like your utility bill Ė itís almost always easier to pay monthly than come up with a big one-time payment. That means you need to manage your withholding so youíre covered without having to come up with a lump sum. The only downside is you may overpay, but getting a refund is a pretty pleasant experience.

  3. How tired are you today? Now, imagine yourself working full tilt when youíre 70. The point being, if you can, contribute to an IRA. Look at our comparison chart in this newsletter to see if you qualify and which type works best for you. And donít worry, you have until April 15, 2013 to make your 2012 contribution!

  4. Remember that ignorance is not bliss. Donít wait for employers, financial institutions and investment resources (like a mutual fund) to send you your tax information. Make a list of all your sources of income, and get your documents all gathered before you start filling out your return.

  5. A good driver uses his rear view mirror. Think about your tax experience last year. What went right Ė and how can you replicate that? What went wrong Ė and how can you make sure that doesnít happen again?

Whatever your tax situation, weíre here to help. For more information on federal and Minnesota income tax rates, and to see the most commonly asked tax questions, click here