Here are eight ways to prepare your taxes now for next year.

Ask Questions

Do you plan on filing taxes on your own or paying a professional to do it? Do you owe taxes for this year or past years? Have you gotten married or had a child? These are all questions that should be asked to help you prepare your taxes now.

If you are an independent contractor or self-employed, there are a few more questions you should ask yourself as far as your business is concerned as well. Do you have any employees? Did you put mileage on your car because of your business? These are just a few of the questions to ask to make sure you are getting ahead of the game.

Know How You Will File

Are you single, married, or filing jointly? Do you have any dependents? Knowing how you will file can make filing a lot easier when the time comes. You will know how much to withhold from your paychecks based on your allowances.

You’ll also roughly know how many deductions you qualify for based on members in your household.

Note Any Extra Income

If you side hustle or make money outside of gifts for your birthday, you will have to report it to the IRS.

Even if you get paid cash, it’s important to keep records of all received income. To make it easier to track, try using a payment system like PayPal, or remember to write out invoices and payments.

Review Your Tax Breaks

There are many ways to save on taxes. If you have kids, are self-employed, own a home, or even drive an electric car, you can qualify for a tax credit or deduction. It’s important to take some time to review these tax breaks and figure out what you qualify for, especially if you are filing taxes on your own or using a system.

If you are using a professional, they may be able to help you find a few more tax breaks, but knowing a few on your own can make the process easier.

If you are filing your taxes on your own, it may be best to write or type out the tax breaks that you know you qualify for and keep them with your tax information. With so many tax breaks, it can be hard to remember all of the ones you qualify for.

Start Tracking Expenses to Prepare Your Taxes

If you haven’t been keeping track of your expenses, now is the perfect time to start. Print off your bank statements and mark any expenses that you had due to a business or side hustles. Also, if you own a home or kids, keep track of those expenses as well.

If you have been tracking your expenses, keep at it. You could always use an app or tool online to make it easier to track expenses to help you prepare your taxes now, but it’s not necessary.

Keep Receipts

Along with tracking your expenses, it’s also important to keep all of your receipts. This is especially important if you own your own business. Again, even if you pay with cash, have some sort of receipt. If you were to ever get audited, or if you are trying to lower your taxes, your receipts will come in handy.

I recommend keeping your receipts in a clear zipper pouch in your tax filing system. To take things a step further, you can also clip receipts by month or type, depending on what works best for you when you file your taxes. If you got a receipt online, just print it out and add it to the pouch as well.

Keep Records Organized In One Folder

All of your receipts, tax information, expense sheets, and check stubs/W2’s should be kept in one separate folder in your filing system. This will make it easy to prepare your taxes now, and easy to pull out when it comes time to file.

Make sure to keep this folder away from public view, preferably in a fire proof safe.

Set Money Aside

If you think you may owe taxes, start setting money aside. It’s never too early to save and prepare your taxes now. In fact, the earlier you start saving, the less chance you have of going into debt or having sticker shock when you see how much you may owe.

Even if you don’t plan on owing money, I still suggest saving some cash for tax season. Filing taxes typically isn’t free, even if you do it yourself. Having some extra cash set aside can keep you from dipping into your regular funds.

It’s not hard to prepare for your taxes now, but it may take some time. Starting early can help keep you from being stressed, and can also save time and money.

8 Ways To Prepare Your Taxes Now For Next Year is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Taxes

What Is a 1099-C?

“A 1099-C is a document sent by a bank when they have canceled a debt,” Craig W. Smalley, EA, founder and CEO of CWSEAPA, LLP and Tax Crisis Center, LLC, said. “For instance, if you have negotiated with your credit card company to pay them a lesser amount than you owe them, the difference would be reported on this form.”

Bruce McClary, the vice president of communications at the National Foundation for Credit Counseling, said this is an important reason to “be familiar with the tax consequences when considering debt settlement as an option. You don’t want to be blindsided by a costly IRS bill when you may already be struggling financially.”

Why Did I Get a 1099-C?

If you have had a canceled debt, expect to see a 1099-C arrive in your mail, as “the bank is required to send this form, because it is taxable income,” Smalley said.

According to the IRS, lenders file a 1099-C if you have $600 or more of debt that is canceled. Here are four common reasons that may be the case.

1. You settled a debt for less than what you originally owed and the creditor picked up the remaining balance (debt forgiveness).
2. You did not pay on a debt for at least three years, and there was no collection activity for the past year.
3. Your home was foreclosed and your deficiency (the difference of what was owed and the value of the home) was either forgiven or you haven’t paid it.
4. Your home was sold in a short sale, and you made a deal with your lender to pay less than what was due.

Still not sure why you received this form? Look for Box 6, which will give you a code explaining why the lender sent it. To decipher the code, you can reference Publication 4681 on the IRS website.

Do I Have to Fill Out a 1099-C If I Filed for Bankruptcy?

Just like with most things, there is an exception to the rule of all canceled debts requiring a 1099-C. Smalley said that “if a debt is canceled because of bankruptcy, you do not have to pay tax on it.” (Remember: Bankruptcy does have a major negative effect on your credit scores.)

Does That Mean My Debt Is Paid?

This depends on why you received the 1099-C in the first place. If it’s because you settled your debt, then yes, your debt is resolved. However, if it’s because you haven’t made any payments on a debt for three years and the debt collector hasn’t tried to collect recently (noted in Point Two above), then your debt is not in the clear and you may still owe.

What If I Get a 1099-C for a Debt I Paid?

“First and foremost, contact the issuer of the 1099-C and ask them to make the necessary corrections,” McClary said. “They will need to send you a corrected 1099-C in time for you to file taxes.”

McClary also noted that if this request doesn’t work, “the IRS has a dispute process you can use. This requires that you reach out to the IRS and let them know you wish to submit a complaint about an incorrectly issued 1099-C. They will provide you with Form 4598 that you will have to attach to your tax return, along with any additional documentation that supports your claim.”

File a 1099-C in the Tax Year I Receive One?

Smalley said that, yes, you do have to file a 1099-C in the tax year you receive one. You can visit the IRS website for more details on filling out a 1099-C and getting it filed.

Statue of Limitations on a 1099-C?

“There is no statute, as the form is to be issued in the year that the debt is canceled,” Smalley said. If this isn’t the case for the 1099-C you received, contact the issuer or the IRS immediately to find out the reason you were sent a 1099-C and to remedy any problems.

The Amount I Owe or Amount I’m Paying Taxes On?

“It is the amount that you are paying taxes on,” Smalley said. “However, if you are insolvent, meaning you have more liabilities than assets, certain cancelations would not be taxable. You have to fill out another form, and you have to make sure that you have evidence to support that you are insolvent.”

How Does a 1099-C Affect my Credit?

The 1099-C form itself won’t have a direct impact on your credit scores. However, whatever behavior lead you to receive the 1099-C likely will be affecting your credit. For example, say you didn’t pay your debt and it was sent to collections. Having an account in collections can have a negative effect on your credit. You can read this guide for more information about how 1099-Cs (and the financial choices that led you to receive one) can impact your credit.

More from Credit.com

• What Is an IRA?
• How to Dispute an Error on Your Credit Report

This article originally appeared on Credit.com.

What to Do With 1099-C, the Most Hated Tax Form is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Other than some local resort areas in Montana, those four states don’t have local or state sales taxes, giving residents and visitors plenty of reasons to shop there.

Some states make up for low or zero sales taxes with high income taxes. Oregon has no sales tax but high income taxes, while neighboring Washington state has high sales taxes but no income tax. In theory, it could pay off to live and work in Washington state and buy everything in Oregon.

But which states should you avoid for high sales taxes? The Tax Foundation recently put out a mid-year report of state and local sales tax rates, combining the state and average local sales tax rates for each state.

Highest sales taxes in the Bayou

The full list is in the report, but here’s the top 10 states for combined local and state sales tax rates, followed by the combined rate:

1. Louisiana: 9.98%
2. Tennessee: 9.45%
3. Arkansas: 9.3%
4. Alabama: 8.97%
5. Washington state: 8.92%
6. Oklahoma: 8.85%
7. Illinois: 8.65%
8. Kansas: 8.61%
9. New York: 8.49%
10. California: 8.48%

Alaska has the lowest average combined rates at 1.78 percent. It doesn’t have a state sales tax.

State rates

California has the highest state sales tax rate in the country, at 7.5 percent. Five states tie for the second-highest statewide rate of 7 percent: Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.

The lowest non-zero state sales tax rate is 2.9 percent in Colorado. Five follow with 4 percent: Alabama, Georgia, Hawaii, New York and Wyoming.

Going where the deals are

Different state and local sales tax rates can cause some consumers to make major purchases in low-tax areas, such as shopping in suburbs instead of cities, or a neighboring state that doesn’t have a sales tax, the Tax Foundation found.

Some Chicago residents, for example, make major purchases in surrounding suburbs or online to avoid the city’s 10.25 percent sales tax rate.

In New England along I-91, which runs up the Vermont side of the Connecticut River, more stores are along the New Hampshire side of the interstate to avoid sales taxes.

The Tax Foundation’s analysis points to a study showing that per capita sales in border counties in sales-tax free New Hampshire have tripled since the late 1950s, while in border counties in Vermont, sales have remained stagnant.

Delaware brags of not having sales taxes on its highway welcoming signs, calling itself the “Home of Tax-Free Shopping.”

And if you can’t get to Delaware? Shop online.

States With Highest Sales Taxes is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Tax professionals can make mistakes just as those who do their own taxes. Mistakes on tax returns are less common now that many people use tax preparation software as those systems are designed to catch mistakes, but there are still plenty of ways you can mess up your taxes. Here are 4 common income tax mistakes to avoid.

Common Number Errors

Depending on how complicated your tax return is, there may be several schedules needed in order to claim deductions or expenses on your return. One of the most common income tax mistakes is a simple and common number error. You might enter one number on the schedule, but enter a different (incorrect) number on another form of your tax return.

While working in a lending office for just over 3 years, this is a mistake I saw on the tax returns of several customers. After seeing this mistake first hand, I always check this on my return before signing it.

Math Miscalculations

Another common error I ran across while inputting information from customer provided income tax returns were math miscalculations. The numbers put into different lines of a schedule would all be correct, but at the bottom of the form these numbers wouldn’t add up. It pays to double check your math if you don’t use a software that does this automatically.

Missing Signatures

Although most people e-file their tax returns, they still have to be signed with a PIN number. The IRS won’t process tax returns submitted via paper documents or electronically if they aren’t signed. Don’t forget that both spouses must sign if you are filing a joint tax return.

Waiting Until the Last Minute

Although I haven’t started gathering up my tax information, I definitely won’t be waiting until the very last minute. Another common, and costly, mistake of filing a tax return is waiting until the last minute or missing the deadline. Luckily this year the deadline has been extended to April 18 instead of the usual deadline, April 15.

If you know you won’t have your taxes completed by April 18, make sure you file an extension by filling out Form 4868 by the deadline. This will give you a 6 month extension to finish and submit your tax forms. Filing this extension does not mean you don’t owe taxes on April 15. If you know you own money, make sure to send it in with your extension request to avoid late-filing and non-filing penalties and fees.

Tax season comes around every year, so we should be prepared for it, but many of us face these same mistakes year after year. This year you can make sure you avoid at least these 4 common income tax mistakes when you file your return.

Have you started working on your income tax return yet? Have you ever made any of these mistakes in the past?

4 Common Income Tax Mistakes to Avoid is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Maybe you wasted this past beautiful holiday weekend working on your taxes. Or perhaps, despite warnings about taxpayer ID theft, you still have midnight oil to burn between now and the April 15 deadline. Either way, you have probably mused, for at least a moment, that this will be the last time you do your own taxes. After all, by plenty of measures, tax prep is getting more and more complicated.

So if you are ready to delegate tax work, now is the time to plan for the 2015 filing season. Here’s some help about the choices you face — specifically, on the kinds of tax preparers you might hire to help you.

First off, you should know that hiring someone else to do your taxes might not be the Shangri-La you imagine. Whoever that person is will still require you to provide a lot of paperwork and do a lot of legwork. You might wonder if you are really saving time at all. Sure, it’s a relief to know a professional is doing the math, and that might result in greater accuracy, but even that isn’t certain. In fact, when Congress’ General Accountability Office studied the issue, it found higher error rates on “pro” returns than self-prepared returns.

Of course, that only means not all tax prep work is the same. In fact, in most places in America, anyone can become a professional tax preparer.

“Anyone can hang out a shingle as a tax return preparer, with no knowledge, no skill and no experience required,” lamented Taxpayer Advocate Nina Olson in congressional testimony during last year’s tax season.

The Internal Revenue Service has tried to require some kind of license for retail tax preparation firms, but so far, that hasn’t happened. Voluntarily certification is available, and you might ask a retail prep agent if he or she has completed the necessary coursework for that. But only four states — California, Maryland, New York and Oregon — require formal certification for tax preparers. That’s why you might consider moving up the value chain for tax help. That leaves you with three other popular options: Certified Public Accountants, Enrolled Agents, and tax attorneys. Never heard of an “enrolled agent?” You’re not alone. Read on to find out what each designation means.

CPAs

First, the most common choice for people who need help with various money issues, including taxes. If you’ve spent hours pulling your hair out while trying to do your taxes — particularly if you are part of the growing list of Americans who earn self-employment income — now is the time to start interviewing potential CPAs. Well, not “right” now. Give them a few days to sleep after April 15. Then spend some time getting to know a couple.

Tax prep help is only one of the services that CPAs offer, and it’s probably not the most important one. CPAs can offer yearlong money advice, such as how to set up an accounting system for your small business, or how to do some basic estate planning. If things work as they should, tax time will be (relatively) easy because your CPA will already have a good understanding of your financial picture. Of course, that kind of handholding isn’t cheap. But if you go easy on the financial advice and use a CPA primarily for tax purposes, the costs shouldn’t be too bad. Back in 2013, the National Society of Accountants did a survey and found the average cost for filing an itemized tax return and one state return was $261 for roughly five hours or work. Costs vary wildly based on region and complexity, of course.

How do you find a CPA? It’s always useful to talk with friends, but never forget the lesson of Bernie Madoff, who got nearly all his new clients via friends — never rely wholly on someone else’s judgment of character. You should always do your own background check, verify current licensing, etc. The American Institute of CPAs is a good places to start your search.

When picking a CPA mainly because of taxes, make sure your CPA specializes in taxes. CPAs can have a variety of specialties — from small business advice to estate planning. Pick yours because they enjoy doing the work you need done.

One critical factor: CPAs are certified by states, as opposed to “Enrolled Agents.” We’ll see why that’s important in a moment.

Enrolled Agents

If you have never heard of this designation, it probably means you’ve never had serious tax trouble, so consider yourself lucky. But enrolled agents are making a push into the mainstream lately — they even have a new branding effort called “Enrolled Agents — America’s Tax Experts.”

Here’s why you should consider hiring one: Thanks to their low name recognition and their sole focus on taxes, they can be less expensive than CPAs, and are almost always cheaper than tax attorneys. Also, because they are federally certified, they are a good choice for taxpayers who might need to file returns in multiple states.

It’s an exclusive group — there are only about 50,000 enrolled agents nationwide. Among the chief benefits of an enrolled agent: If you are audited, you can be represented by an EA. Taxpayers with complex returns might also consider enrolled agents. They are tax specialists, and they are required to take 72 hours of continuing education every three years.

How do you find an enrolled agent? The National Association of Enrolled Agents website is the best place to start. You can also verify enrolled agents at the IRS website.

Tax Attorney

Tax lawyers aren’t only for trouble. Individuals with high net worth or small businesses might consider involving a tax lawyer early on. A tax lawyer can help set up business structures and help you make sensible, defensible tax choices during the year. With this high level of service comes a high price tag — bank on at least $200 to $400 an hour to start. If you need help resolving a tax issue, count on at least $1,500 to $2,000 for even the simplest case, according to TrustedTaxAttorney.net. This cost is the single most important reason you should get to know enrolled agents; they can represent you in an audit, or before the IRS for any tax issue, for a lot less.

Whatever choice you make, it’s important to recognize this critical fact: Even if you get bad advice, and even if you pay someone a lot of money and that someone makes a mistake, you are the one responsible for paying the IRS what you owe. If you underpaid your taxes, you’ll owe the IRS and will have to pay Uncle Sam back with interest. So choose your help wisely. And however painful it is, always double-check the work that’s done.

Related Articles:

• How to File Your Taxes for Free
• Can Taxes Affect Your Credit Score?
• Will You Get Audited?

This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.

A Brief Guide to Never Doing Your Own Taxes Again is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.