Tips for a Pain Free Tax Season
The mere thought of an upcoming tax season gives us goose bumps. Some people are so worried about tax season, it keeps them awake late at night, racking their brains to try and recollect all that they have to declare. Regardless of how you feel, it is a necessary evil which you have to confront annually. Here are a few simple steps you can take to enjoy painless tax seasons.
The easiest way to make tax season feel like a breeze is to create and follow an organization system. If you do this, you will cut away the majority of the stress encountered at tax filing time when you find yourself clueless, rummaging through the countless stacks of papers in your drawers at home and filing cabinets at work hoping dearly to find that tiny bit of paper you so desperately need.
Documents which you will need to file your taxes do not conveniently come all together at your doorstep at the end of March to permit you to take them to your accountant and be done with the dreaded tax filing routine. Unfortunately, you will receive countless documents throughout the year which you need to file properly so you do not:
1. 1. Miss out on any tax deductions (if you misplace a donation receipt).
2. 2. Forget to declare any income (from a part-time salary or self-employed business in addition to your regular job).
An excellent system is to get a set of folders or our personal favorite, an old-school accordion file. Label each folder or section with the type of documents you received during the year (charitable receipts, education credits and expenses, mortgage interest, medical expense receipts).
W2s and 1099s which are typically mailed out during January to March should also have their appropriate sections or files. One final section many people may not have is for your previous tax returns which you may need occasionally for reference purposes. Keep at least seven years’ of tax documents at all times in case the IRS requests certain information.
Once you have your documents in order and ready to go, you need to decide how you will file your taxes for the current year. The options to you are not overly complicated: prepare and file a paper tax return, prepare and file your tax return online using tax software or hire a tax professional and let him or her prepare and file your taxes.
Regardless of the method you end up selecting, ensure you have done your research and are well aware of the pros and cons of each option. If you do decide to file taxes yourself, consider the possibility of asking a professional tax practitioner gloss over your return as there are many rules and regulations and mistakes do tend to occur.
If you are preparing your own return, block off a chunk of time where you will put aside all distractions and get through your complete return in one sitting. Doing it piece-meal may cause you to miss out entering important information which may erroneously believe you entered the previous time you worked on the tax return.
Pick a place where you will be able to concentrate and ask family and friends to keep away during the allotted time to let you focus on the task at hand.
If you asking a professional tax preparer to handle your taxes, you should still take the time to review your tax return in its entirety. Tax professionals are great at easing your tax season jitters as they carry the heavy load and prepare your return. You can have confidence in your tax professional that they will use all the credits and tax deductions you are entitled to claim and will help minimize your current and future tax bills (with proper tax strategies).
However, you should not remain naïve about your taxes. Take the time to review the accountant’s work. You might come across certain strategies or credits claimed on your return which you were unaware could be applied in your situation. You also know your situation best, so might more easily spot an omission.
For instance, if you took academic classes during the year which helped your employment skills, you are eligible for a specific education credit. Perhaps you didn’t give this document to your accountant and there is no way for him or her to know a credit is missing.
As the heavy hitting is already done by your tax preparer, take a little time to review your tax return in detail, even if it has been filed already. There are simple methods your accountant can take to correct a return already submitted to the government.
Follow the simple strategies outlined above to make every tax season painless and allow you to care about the more important things in life, rather than staying awake late at night with trepidation and procrastinating in filing your taxes.
Financial Balance LLC