How to organize your tax records now

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(MoneyWatch) About 160 million individual tax returns will be filed this year, and over half of these will result in a tax refund. The average refund last year was about $3,000.

Whether you'll prepare your own return or use the help of a professional, the first thing you need to do is to get your tax information organized. Here's a checklist of the tax records that you'll need to gather:

- Your 2011 federal and state income tax returns

- Checkbook register and checking account statements for 2012

- Copies or images of canceled checks

- 2012 pay statements and W-2's

- Forms 1099 issued by bank and investment accounts

- Year-end mortgage statement

- Property tax receipts

- Receipts for expenses that may be deductible (see "itemized deductions" below)

- Financial and investment property records

Organize it. Use a filing system organized by category that includes folders for bills, tax documents and statements. Then put the filing system to use by filing your tax information and statements as these come in rather than letting them pile up on the counter or desk. I like to use a separate multi-file box for tax return and related statements for each year. These come preset for this purpose, and you can find them at Wal-Mart, Target and Staples.

Close out your checkbook register for 2012 and start a new one beginning January 1. File the register from last year with the 2012 tax information.

Deduct it. If you think you may have some expenses you paid that can be claimed as deductions on your tax return, then review a copy of Schedule A - Itemized Deductions and applicable instructions. Do this before you sit down to prepare your tax return yourself or with a professional. The major categories of expenses that may be deductible include:

- Medical and dental expenses

- Taxes paid

- Interest paid

- Gifts to charity

- Casualty and theft losses

- Job expenses

- Miscellaneous deductions

According to tax filing reports, the two biggest categories for which people miss claiming deductions is interest and taxes paid. Over 60 percent of the returns filed by homeowners omitted deductions for mortgage interest, real estate taxes, and state and local income taxes.

Also, remember that if you refinanced a mortgage, get a copy of the HUD-1 Settlement Statement. This includes any interest and points paid that may be deductible.

Get a copy of lost tax return. Finally, don't worry if you've lost or discarded your 2011 tax return and need a copy to refer to in preparing this year's tax return. Transcripts of tax returns, which provide the information on most lines of the main forms, are generally available for free from the IRS and can be obtained by phone, online or by filing "Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript." If you need a full copy of the actual tax return, then file "Form 4506 -- Request for Copy of Tax Return." You'll have to pay a fee of $57 for each requested return.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.