Death and taxes are the only two constants in life. April 15 is therefore a dreadful day for most people. This ominous date on the calendar doesn’t have to be ominous or overwhelming. You can reduce stress and improve your financial future simply by getting a jump on your tax preparation early.
Here are some strategies well worth considering:
1. Get your records together early
Take time to gather every important document beforehand so you have everything you need to get started. Make sure to have your past tax returns on hand. These will provide valuable insight for where to save money by comparing to previous years’ results.
2. Determine how you’ll complete the paperwork
You can prepare your own taxes or hire a tax professional to walk you through the process, fill out the forms, and then make sure they are properly submitted. Start looking for a tax pro as soon as possible. If you wait until April 1st, you will find nothing but irritable and swamped tax preparers to choose from.
- If you plan to file your tax documents on your own, it would be prudent to plan ahead and prepare by reading up on current tax law changes as well as new tax credits and deductions.
3. Look for help from government resources
The Internal Revenue Service website and other taxing authority websites for individual states are valuable resources for those in need of tax help. Use these free resources for assistance and insight while filling out your tax return.
4. Estimate your taxes
Estimate your taxes ahead of time so you know what to expect. The IRS publishes withholding calculators and many other useful tools. These will help you to determine what your taxes may be like prior to filing. This estimation will go a long way toward helping you prepare for the process of actually filing.
5. Make a last minute tax-deductible purchase
If your estimates show that you might owe money to the government, make any purchases that can give you a tax deduction before the end of December. Make sure they are necessary business expenses if you’re self-employed.
6. Contribute as much as possible to any tax-advantaged retirement funds
Funding a traditional IRA can reduce your taxable income even further and thus reduce your tax liability as well.
7. Donate cash or used items
Donations must be made before December 31st to receive the benefit in that year. Don’t limit yourself to cash or writing a check. You can donate an old car, stocks, bonds, or anything of value to the right charity. Be sure to get a receipt!
8. File early if you expect a refund
The sooner you file, the sooner you’ll receive your tax refund. You can file in January if you have all your paperwork in order.
9. E-File your return
There are numerous benefits to electronically filing your tax return. Most e-file software will compute all eligible tax credits and deductions for you based on the information that you put in. If you’re getting a refund, it will be direct deposited quickly vs. waiting on the mail to deliver your return to the IRS.
The Bottom Line
The best advice is to suck it up and get your taxes done early. Once you get all your paperwork, just sit down and knock it out. It’s better to rip a Band-Aid off in one motion than going slowly and making it hurt for longer. With planning and preparation, you’ll maximize deductions and simplify the process.