With tax season finally over (unless you asked for atax extension), this is good time to reflect on what you can do for next year in order to make preparing your returns a more pleasant experience.
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Preparing tax returns, gathering the necessary documentation, and double-checking that everything you filled out is correct can stress out even the most organized person. This is even more important if you are in a little need of upgrading your organizational skills, and let's face it, we could all stand to be a little more organized.
One of the best tips that I can offer someone who is looking to reduce their stress levels around tax time and concerning their tax return is to try to get more organized for the coming year. An often-cited phrase and mindset is that the more organized your surroundings are, the better you will feel, and the better you will perform workplace activities. Especially with everything, and everyone, clamoring for our attention, focus, and energy on an almost daily basis, it can be difficult to decide what items to actually prioritize.
Figuring out what your priorities are in life is not something I can advise on, but what I can say for certain is that picking these priority items, including your finances, will help you become more organized, less stressed, and more confident come tax time.
Tax time only comes once a year, but it can feel like it lasts for months -- here are a few of my favorite ways to reduce the stress and time spent on tax, and financial documentation in general.
DETERMINE WHETHER OR NOT TO ITEMIZE
As an individual, you basically have two options, itemized deductions or a standard deduction, with how you want to file your individual 1040, and making that decision now will help your figure out what you need to save and keep track of during the year. One thing to keep in mind is that not every dollar you spend will be deductible -- for the 2017 tax years (filing in 2018), the expenses you are seeking to itemize (specifically medical) must exceed 10 percent of your adjusted gross income (AGI).
Another thing to remember is that everyone, whatever your filing status, is eligible for a standard deduction. For single filer taxpayers, the standard deduction is $6,300 -- it is important to work with your CPA or tax professional to make sure you do not end up getting less. Fortunately, the IRS has a form that helps you figure out if you are better off itemizing or taking the standard deduction.
If you choose to itemize your deductions you will, in general, have to keep track of more documentation during the year. Some of the most common itemized tax deductions include, but are not limited to medical expenses, charitable contributions, state and local taxes, foreign taxes, mortgage interest deductions, mortgage points, health insurance if you are self employed, and losses related to natural disasters. There are many more options out there, so be sure to work with your tax adviser to stay current.
TRACK YOUR DONATIONS AND DUES:
If you donate to different charitable organizations and groups, or even pay dues for professional organizations, which can range from animal rights groups to dues paid for for realtors and even CPAs, you might be able to take that contribution, or a portion of it, as a tax deduction. You will either receive an email at the end of the year letting you know how much you had donated, or will receive a receipt explaining how much of your payment or contribution is tax deductible. In my experience these organizations are very good at providing this documentation, but if you have not received your documentation by the end of January I would follow with an email or phone call.
FILE YOUR FINANCE DOCUMENTS
We all get way too many emails during the course of the year, but taking a little time to auto-file where these emails go can save you a lot of stress come next tax season. Bank e-statements, credit card e-statements, retirement account information, and any business expenses should either be stored in a tax file in your inbox, or put in a tax folder during the year. A little time now will save you a lot of time next tax season.
KNOW THE TAX DATES AND DEADLINES
April is well-known as tax month, but there are several other dates that are important during the year. Quarterly taxes for your business, for example, are due the 15th of April, June, September, and January, so make sure to file and pay if you need to. Lastly, you should have received all of your tax documents, including W-2's and any 1099's, by January 31st. If you find yourself missing documentation be sure to reach out to keep yourself from falling behind. Your outreach efforts might include your IRA program manager, former employers, or companies you did some consulting for during the year. Again, most organizations in my experience are very good at getting these documents out the door, but it is important to keep an eye on where these documents are.
Sometimes the most painful time during tax season is opening a shoebox full of mismatched and unorganized documentation, and trying to make sense of it. That is stressful for both you and your tax preparer, and might actually result in your missing out on an important deduction or credit that you are due. Taking some time during the year to get, and stay, financially organized can really pay off the next time tax season, or some other big financial occasion, comes around.
Get Tax Relief Help Today
If you think that you may help filing your 2017/2018 tax return, you may want to partner with a reputable tax relief company who can help you get the max refund. Advance Tax Relief has a offices in Houston, TX and Los Angeles, CA and helps many individuals just like you work with the IRS to solve a wide variety of issues, including penalty waivers. Call our team today at 800-790-8574 for more information. For a free consultation, schedule an appointment with us online.