If you are like many of us, you are breathing a huge sigh of relief that the last pesky K-1 came in and you have sent all the tax documents to your accountant.
Or, if you “do-it-yourself,” you have wrangled with your tax software to the point where you have no error alerts. Yay!
No one likes to do taxes, except maybe for accountants or why ever would they have chosen that for a career?
Not only is the document gathering and fact checking time consuming, but the fear of doing something wrong or filing late keeps people up at night. Filing taxes is never going to be a favorite chore, but there are steps you can take to make it easier for yourself next year.
Here are my seven tips to chilling at tax time next year:
1. Don’t stress about getting your taxes done “early.”
You need to wait until your employer, various banks and other institutions send you tax documents before you can finish your taxes. These institutions have deadlines which they mostly keep and you just have to be patient.
As long as you file by the deadline date in April, or properly file an extension, you won’t pay any penalties or extra tax.
2. Find a good software program that will let you identify and track expenses.
Log in monthly and categorize your tax-related items. At year-end, you just need to click a couple of buttons to produce a tax expense report. Voila!
3. If you don’t want to use a software program, be diligent about saving receipts or writing down tax-deductible expenses.
Either deposit them into a shoebox or better yet, slip them into separate envelopes marked: charitable deductions, property taxes, investment-related expenses. You’ll be so happy you did when tax season rolls around again.
4. If you plan on hiring an accountant to do your taxes, don’t wait until March to do it.
It’s best to establish a relationship as early as before year-end. Accountants get busy the few months before the tax deadline in April.
5. If you plan on working with a financial planner, hire someone earlier in the year.
As a financial planner, I also get a lot of people contacting me for planning in March. Doing taxes forces us to take a hard look at our finances, and I get it – it’s a motivator to get the help we need. Unfortunately, planners also get busy during tax season, so it pays to think about hiring someone earlier in the year.
If you own a business or have lots of employee-related business expenses that you can deduct, use one credit card for these charges for easier tracking later.
7. If all else fails, you can file an extension.
For 2016 taxes the deadline for filing is October 16, 2017. But, remember that you still have to estimate how much tax you owe and send in a check with the extension. There are no free rides when it comes to the IRS.
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