There’s no getting around it: the tax-time hustle can be stressful and overwhelming. Not only do you have to comb through a year’s worth of documents, but figuring out which numbers go on which documents can be confusing. Whether you’re doing your taxes alone or with the help of a professional, here are a few tips that will help you remain calm:
Tax Tip #1: Don’t Procrastinate
Even though Tax Day (April 18) is fast approaching, the longer you wait to tackle your taxes, the worse it gets. Get going now! Don’t be one of those people rushing to the Post Office at midnight. When you’re under that kind of pressure and racing against the clock, not only will you be sweating bullets, but you are more likely to make filing errors. You may miss important deductions that will result in you paying more taxes than necessary or causing you to get a smaller refund. Even worse, you could fail to report income, which may result in interest and penalties down the road.
Tax Tip #2: Get Organized
One of the biggest hassles at tax time is getting all of your documentation together. There’s nothing worse than getting started, and then having to search everywhere for the pertinent documentation you need. So, plan ahead and have everything together that you’ll need. Consider using a color-coded folder for each of your categories.
- Social security numbers for yourself and any others who will be included, such as a spouse or dependent. If you’ve created a legal entity for your business, then you’ll also need your taxpayer identification number.
- W-2 forms if you are/were employed or 1099s if you are an independent contractor. You’ll also need other documentation for miscellaneous income you may have earned throughout the year, such as rental income, income from financial investments, even prizes or awards you may have won.
- Deductions: Investment losses, some out-of-pocket medical expenses, charitable donations, personal property taxes, non-reimbursed business expenses, state and local taxes all count as deductions. If you are self-employed, you’ll also want receipts for business expenses, mileage, etc.
Make sure you don’t throw anything away that looks like it might be important tax information. It’s better not to need it than to need it and not have it.
Remember, every dollar of documented expenses translates into one less dollar of taxable income.
Tax Tip #3: Decide How You’ll File
- Paper and Pen. If you prefer filling out the forms with a pen, then make sure you have the right forms. You can find them at the library, post office or online.
- Electronic filing. The IRS now allows you to file online using tax preparation software. These online programs correct your math for you so you make fewer mistakes. Also, refunds are usually quicker.
- Tax preparer. If you’re worried about filing your own return, search for a professional tax preparer. To find the right person, ask for recommendations and read online reviews. However, the more work you do in advance, the lower your expenses will be.
Tax Tip #4: Educate Yourself
Tax law is extremely complicated, and it changes regularly. So before you jump in and start to prepare your taxes, take time to familiarize yourself with some of the key areas that affect you and your business. You won’t become an expert, but at least you’ll raise your awareness level.
Turn to the IRS for help. The IRS website is a wealth of information on tax laws and tips for preparation. Here are a few places to get the assistance your need.
- Volunteer Tax Preparation Centers (Volunteer Income Tax Assistance Site or VITA) or contact the National Community Tax Coalition Organization. (tax-coalition.org)
- Call an IRS 800 number to hear pre-recorded tax advice.
- Visit the IRS tax center to help you quickly find information related to your particular area of interest, industry or profession.
Tax Tip #5: Always File
If you’ve waited until the last minute, don’t make the mistake of not filing, even if you think you don’t owe a dime. That decision may ease your stress for now, but it will catch up with you. So consider filing for a six month extension and pay as much as you can based on a reasonable estimate. In other words, pay a portion of what you owed the previous year. An extension will buy you some time to get your ducks in a row.
Going forward, start planning for your 2017 tax return today. Tax time can be stress-free with a little effort on your part now.