How to get a Head Start on Tax Season
Tax season is a challenging time of year for all Americans as well as people all around the globe. You have to gather mounds of paperwork, do more math than you’ve done over the course of an entire year, and try and make sense of both state and federal tax laws. To say it’s stressful is an understatement. But if you’re well prepared in the months before that April deadline, you’ll be ready to take on tax season with more confidence than ever before! Here are a few tips to help get you there.
Stay organized all year
The key to preparing for a smooth tax season is staying organized and on top of your finances throughout the year, not just before you file. This will make it easier for you to gather your necessary paperwork so that you’re not scrambling to locate receipts, W-2 forms, or other important information while you’re already stressed out about filing. Here are some guidelines to help you stay organized.
- Go paperless: If you have a hard time keeping track of receipts and financial paperwork, you might want to take advantage of electronic banking and file management to help you keep things in order throughout the year. Many companies use online databases that allow you to access your W-2 and tax information online, and print them out when you need them. Ask your HR manager if this is an option for you and you’ll be glad you did when tax season rolls around. Additionally, if you qualify for any tax deductions or credits, be sure to make online copies of your receipts so you can easily refer back to them when you file in April.
- Create a tax file: Even if you go paperless with your tax documents, it’s a good idea to keep a hard copy of your tax paperwork and other important financial and personal documents like your Social Security card, your will, etc. In fact, the IRS says taxpayers are required to keep their tax records for three years in case they are audited. To keep your documents secure and available when you need them, you might invest in a document safe that is damage and theft-protected. To help you stay organized, go through your paperwork each tax season and shred any tax documents that have surpassed the three-year threshold.
Weigh your filing options
Deciding how you’re going to file taxes is one of the most important things you can do in order to avoid chaos during tax season. Choosing the method that’s going to be the best last-minute option isn’t always the best thing you can do for your finances, so it’s a good idea to evaluate your options early on.
- File online: For many taxpayers, filing online is the best option since it’s fast, convenient, and budget-friendly. But if you have a complicated tax situation as a self-employed person or small business owner, you might need some extra support to help you file in accordance with IRS and state tax standards.
- File with a tax preparer: As we mentioned before, filing taxes on your own can be seriously challenging if you have a complex tax situation, such as business taxes or self-employment taxes. The reason filing with an accountant gives you an edge is because they use tax software for professional tax preparers which allows them to ensure accuracy and timely filing.
Take note of your tax responsibilities
Before tax season approaches, it’s a good idea to know what your tax responsibilities are in the first place. This information will be helpful as you budget for your income tax bill or when factor in extra money when your tax refund rolls around.
Do some research on federal and state tax laws to help you anticipate what you’ll owe in taxes and whether you’ll be eligible for any tax deductions, which could help you save money on your annual tax bill. Remember, if you claim any tax deductions or credits, you’ll need to have the receipts to prove it.
Our last tip for the tax season is making sure you file on-time, or better yet, early. No one wants to file taxes, so it’s easy to postpone them and end up having to file late…which could cause you to incur late fees. So, just get it over with as soon as possible!
Use these tips to help you file your annual taxes and this tax season will be the most manageable yet!