5 Tips to Make Tax Time Less Taxing
January 12, 2015If Christmas is the most wonderful time of year, why does it always have to be followed by its stressy and messy cousin “Tax Time.” Remember that New Year’s resolution to get your financial life in order? Well, it’s not too soon to start organizing the files, papers and “stuff” needed to do your taxes.
If those holiday feasts and bowl game nachos didn’t give you indigestion, the thought of dealing with your taxes usually will! “Am I missing any important tax forms?” “Am I missing any big tax breaks?” “ Should I do my own taxes or get some help?”
Tax season doesn’t need to cause so much grief, but just like with that New Year’s diet, it is going to take planning and getting psyched up to tackle it. Rather than wade through tax forms or software choices, many Americans choose to get some help with their taxes while others have found doing their taxes themselves to be rewarding and even interesting. Here are some tips to make your tax preparation a lot less stressful!
1) Get It Together – First find a file, box or document management system to organize your tax data. Consider buying an accordion file or dedicated file box for your information. Most tax preparers figure their customers expect them to do the hard work, but making the preparer do the easy organizing work can make your return unnecessarily expensive. If you’re doing the return yourself, organizing yourself can turn a burden you want to avoid into a much quicker job.
2) Be On The Lookout – By late January, you’ll be receiving your workplace W-2’s, Form 1099’s and 1098’s, and now the new Form 1095 for health insurance will start to be issued. Use a checklist like this to track what’s come in and what might be missing so you can contact issuers later. Most tax mistakes are caused by missing information the IRS and state received but you didn’t or simple math mistakes like transposing numbers.
3) Shop the Software – Tax preparation software has become easier than ever to use, so do-it-yourselfers will find a few options to consider. Turbo Tax, H&R Block Tax Software, TaxACT, ESmart Tax and Tax Slayer offer online and, for some, CD installation of their programs. Taxpayers with simple returns may be able to download and use a free version of one of these popular programs. Like anything you buy, it may pay to read objective reviews and ask a trusted friend or adviser their opinion on the options. If you try it online first, you may leave yourself an “out” to go to a preparer before you have to pay.
4) Handle the Hand-Off – For those who know their limitations or prefer to have an expert do the work, finding someone who will take your money to do your taxes is the easy part, while finding the right or qualified person might take a little more effort. All qualified tax preparers should have a PTIN (Preparer Tax ID Number) which identifies them as having taken at least some ongoing training on taxes. But the range of expertise can vary a lot, and don’t think that just handing a paid preparer your data lets you off the hook for the return’s accuracy.
The IRS has a helpful list of considerations when finding a preparer, but a basic rule is to hire enough expertise for the job. If your return is more complex and has numerous schedules and forms, hire a CPA who has deep tax experience over a recently trained preparer. If your return is less complex, an Enrolled Agent may be able to do the return less expensively.
5) Don’t Forget the Follow-Up – When you have completed your return, don’t forget to have the preparer sign off as paid preparer or don’t accept the return. While you’re at it, talk with the preparer about any planning opportunities for the months ahead. If the preparer can’t address any, it might be wise to shop for another preparer next year. Don’t forget to tell the preparer about any changes in your life like a job change, move or a parent moving in with you. The preparer can’t help you save more if you don’t communicate.
If you’re doing your own return, don’t forget to do your state and local taxes as well if there are local filings due too. However, don’t be surprised if the state return costs a fee even if the federal one was free to file. Finally, don’t forget to follow up with the payment if you elect to file electronically but pay later by check – your payment options require you to pay as much as you can by April 15th to minimize penalties and interest.
Tax time is enough of a task to face without making it harder on yourself. Pulling it together early can keep you from pulling your hair out later! You’ll be glad you did.