Preparing to Prepare Your Taxes

It’s almost tax time. For some, this is a dreaded season, while others, look forward to receiving a nice refund. Whatever your situation, here’s are a few ways to make the process as painless and manageable as possible.

 

Gather all Necessary Documentation

 

This tip may not be a new one, but it’s one we must mention as a friendly reminder. Know ahead of time what documents you will need to file your taxes and start gathering them into one spot. From W-2s, to the proper forms for reporting various types of interest, it’s important to make sure you have everything lined up and ready to go. In addition, gather all your receipts if you’re planning on itemizing your deduction vs. the standard deduction. Staying organized throughout the year is one of the best ways to expedite this process in the future. If you choose to go to a tax preparer, this can also reduce your costs as it should speed up their time spent on your file.

 

Decide How You’re Going to File

 

There are many ways to file your tax return from doing it yourself with pen and paper or hiring a professional. Each way has its own set of advantages and hurdles to overcome, so here’s a quick breakdown of each method:

 

Mailing your return yourself:

Pros: It’s free, outside of postage. You’ll also learn a lot about taxes doing it this way. You may even find that it’s not as complicated as you thought! You can download all the forms necessary here: https://www.irs.gov/filing

Cons: There’s a reason people make a living doing other people’s taxes, it’s complicated. While you may be in a situation that requires a 1040-EZ, your situation may be more complicated.  If you’re not sure about tax laws, you may end up leaving money on the table!

 

File Online with Third-Party Applications:

Pros: They make taxes simple, dare we say almost fun. Just input the information asked for and the program will do the rest! It’s a quick, simple solution to solve your tax headache

Cons: It may be quick and straightforward, but that comes at a price. Software like Turbo Tax or H&R Block can range from $0-$119 depending on your tax situation. Credit Karma Tax is newer on the scene and is offering all filing for free. The catch being you and your financial information are the real product. Credit Karma won’t sell your information, but they will use  offer you targeted advertisements and promotions. So, do your research before jumping in with an online program.

 

Hiring a CPA:

Pros: For the most part you’ll know you’re filing correctly. Hiring a CPA is the easiest way to make sure you’re getting the right refund. They have experience with a wide range of situations and will be able to help navigate through the tax codes and forms.

Cons: They can cost a pretty penny. You’re paying for the best service so be prepared to pay a decent rate for a decent CPA. You’re also trusting another person they’ll do the job as advertised.

 

File Early

 

One reason to stay organized is to ensure that you can file as soon as possible. By doing so, you reduce your chances of misplacing certain documents and you finish sooner, rather than allowing your taxes to hover in the back of your mind for the next few months. Another reason to file early, is to receive your money back as quickly as possible. If you get a refund, it means you paid the government more than necessary throughout the year. It’s your money! Take advantage of it and put it to work for you. You won’t earn any interest on it if it’s still sitting with Uncle Sam.

 

 

Adjust for Next Year

 

It’s important to work smarter not harder. Let the work you do this year, minimize the chaos for next year. This step will allow you to re-evaluate the previous year and adjust your withholding allowance to maximize your money. Perhaps you would rather have more in your paycheck throughout the year, or maybe you would like to have more money collected throughout the year for a larger refund. Keep in mind that you aren’t going to earn interest by “saving” with the government. However, you won’t be tempted to spend your savings early if it’s collected from your paycheck.

 

Moral of the story is to get started early. Procrastinating isn’t going to save you any money, in fact, it can cost you money in lost interest and unknown headaches. Do you have any tax tips that we haven’t mentioned? We’d love to hear them in a comment below!

Leave a Comment

Your email address will not be published. Required fields are marked *