That’s right… it’s tax time! What can you do now before you provide your documents to your tax preparer? With a bit of forethought and preparation, you can make this year’s taxes go as smoothly as possible.
Actually, there’s no grand secret to filing taxes in an easy and efficient manner; it’s simply a matter of setting a system of organization and sticking to it. An old shoebox, while compact and useful, is not the most effective system for holding your financial information in an easy-to-access manner.
Here at Donnelly Tax Law, we help you gather your documents into our secure file system from wherever you are in the world.
Tax Time Tip 1 - Keeping Track of Receipts
Even if you don’t get a single write-off for receipts, it’s well worth your time to keep them in logical order. There are plenty of programs that let you scan receipts and organize them on a computer or tablet. Or if you don’t like a digital system, a notebook and glue stick can work.
The benefits of keeping receipts are twofold: You can find any receipts if they’re eligible for tax purposes and you’ll have the receipt if something breaks.
Tax Time Tip 2 - File Paystubs and Invoices
It’s worth getting slightly more technical if you’re going to take your taxes seriously. When you end up paying an unusually large tax bill or receiving a large return, you need to find out what caused it. You’ll usually discover that the withholding was off all year.
Check the IRS tax withholding tables. If you leave your W-4 as is, you can wind up withholding too little, which can bring penalties. Track your income and the tax that comes out on a monthly basis. This information is right on your paystub. Put it into an Excel file and compare it to the tax bracket and rate you should be paying. This will prevent nasty shocks — you’ll be able to adjust withholding early to avoid a larger, year-end discrepancy between what you should have been paying and what you were paying. File a new W-4 to make changes.
This is especially important this year, as the IRS has issued a radically new Form W-4. Filling out a new one is not mandatory (unless you’re starting a new job), but it may be wise. Be sure to provide a recent paystub so your tax professional can advise you on filling out a new form.
READ MORE: IRS Releases Radically New Form W-4
Tax Time Tip 3 - Life Changes
Did you have a child in the new year? Get married or divorced? There is a whole range of life changes that should automatically prompt you to make tax-related changes, including a marriage, a divorce, the birth of a child, a second job and a new house. These changes will affect you whether you are a regular employee or a contract worker. Be sure to organize all your W-2 and 1099 forms.
There are also new rules on retirement accounts, regarding minimum distributions. Some of these changes could affect your estate plan, as laws have changed regarding inherited retirement plans. So be ready to provide any statements or paperwork you received regarding IRA, 401(k) or similar plans.
Clients of Donnelly Tax Law get our annual Tax Preparation Questionnaire that guides you through these life changes, so that we don’t miss any information that will affect your return.
Make Tax Time Go Smoothly
Finally, provide last year’s tax returns as well. This is especially important if you did your own taxes last year, or worked with another preparer.
In the long term, get serious about keeping organized records, watching your withholding, planning your deductions and reviewing your tax return. If you do, when tax season comes each year, it will be more bearable and easier to handle. Prepare your questions and concerns for when the answers to your tax questions surface. Hit the ground running!
Relieve Yourself of Tax Time Worry
Even with being organized, tax time can be a stressful and confusing experience to navigate. If you need help and don’t want to do it on your own, Donnelly Tax Law can prepare your taxes for you. Schedule a consultation to get started.
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