Tax Season Comes and Goes: Learn How to not Dread it
Sometimes it is hard to imagine what other areas you could improve your finances. Many People are currently going through a time of realization with the new tax code, seeing how much their tax is, and how much of a refund they are actually getting or how much they may owe.
If you haven’t done your taxes, make sure you get all the documents you need organized first, and for most situations using simple software or a local tax preparation office can be a time saver to getting your taxes done. For more complicated situations, be sure to interview a couple of CPAs or tax professionals to find someone knowledgeable to help with your specific situation.
A Couple of Tips on How to Make Next Tax Season Not as Stressful
Get Organized and Create a File
Since you have just gone through this process, you are very familiar with what you need and what will be helpful to track throughout the year. Take those lessons that you have learned, and the frustrations that you shared and set a plan to help achieve a less stressful tax time next year. Here are a couple of tips.
The first, and probably most important tip, in your filing cabinet create a folder or file for the upcoming tax time. Though many of the forms you will need will be coming at the end of this year or beginning of next year, there are still some things that can be tax items. Whether you itemize or not, you want to ensure you keep records, of large purchases (sales tax), donations, or other deductible expenses such as childcare. Having a place to put these records throughout the year will save you from the headache of trying to find the amounts or documents during tax time.
Verify Your Withholding
Another good tip is to check your withholding. If you received a very large refund and don’t expect your income to change drastically, you may find going to your W-4 and changing your withholding with help you put more towards savings or retirement plans throughout the year.
If you want to keep getting a large refund, you can do that too, just plan on where to save or invest it and try not to spend it on things before you get it.
If you are expecting an increase in income, or a decrease in tax write offs than you may want to increase your withholding to ensure that you don’t owe a tax bill when tax time comes.
Check Against Last Year’s Taxes
The last tip, compare your tax return to last year’s. Most tax returns do not change drastically other than for a minor shift in income or tax deductible expenses. Comparing to last year’s tax return, will ensure you didn’t forget something like a tax deductible expense on a rental property or an interest statement from a bank. Using the same preparation method year after year can also help in this regard as well.
All in all, you shouldn’t dread tax time. With prior planning and proper preparation, you can make it become a non-event.