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Tax planning is a good idea.  Many people get caught unawares when tax time comes.  They say that they wish they had planned better so they could avoid some of the problems that they encountered.  Let that be your one-time wake up call.

Tax planning involves sorting out your tax situation ahead of time so that the entire year can flow smoothly.  You can still look for all of the tax benefits that you can find, but you will be in a better position to receive them and not be desperate for deductions to avoid paying Uncle Sam.  As soon as your taxes are wrapped up for the current filing period, start planning for the next year while your mistakes and frustrations are still fresh in your mind.  Here are some tips to help you:

• Make sure everyone has a valid social security number

To claim the earned income credit and any other credits that involve children, they need to have a social security number.  Newborns are not exempt.  If you know that you will be giving birth soon and your child will need that number for your tax return, do what you can to expedite the process.  Without that valid number, that child can’t be used to claim credits or deductions on your tax return.

• Ask for tax forms in advance

An employer is required to have all W-2 forms to their employees by the end of January after the end of the calendar year.  For freelancers, this means that you need a 1099 form from your clients.  The 1099 form records the amount of income that they have paid you in the past year.  1099 forms are also received for interest earned on banking accounts and investments.  All of these forms help you to file your taxes properly.

• E-file your taxes

Paper returns are a thing of the past.  Even if you use software, the IRS recommends that filers use the electronic method for ease and faster returns.  When you send in a paper return, the numbers have to be keyed into the computer system.  Human error being what it is, a missed keystroke can cost you time and money.

• Set up your home office

A home office is a good source for tax deductions.  If you have a home business or plan to start one in the coming tax year, get things in place from the beginning.  A home office deduction can benefit your taxes immensely but you have to meet the requirements in order to get the deduction.  The office must be used for business only — that includes any equipment used for your business.  As long as the requirements are met, you can deduct a portion of the mortgage and utility bills for the home office.

• Keep good records

Remember the guy who had all his receipts in a shoe box?  What a nightmare.  If you already have an idea of deductions you believe you can qualify for at the end of the year, keep good records from the beginning.  If your car is used for business, keep track of the mileage.  Good record keeping is needed to gain a deduction for charitable contributions, especially if they are expensive goods.  A receipt from the receiver and a document verifying appraisal are needed to get credit.

Take the time to set yourself up for a good tax year.