Tax season is dreaded by most and stressed by all! Many wonder if they’re processing their tax return accurately while others are stressed about potentially owing the IRS money. Another common worry is the possibility of having your tax return audited. Although the idea of tax filing sounds daunting, there are a variety of tips you can follow to take the stress out of the filing process.
Tip #1-Understand Your Documentation
When filing taxes, you will need to refer to a variety of documentation for your figures. If you are using an accountant to file your taxes, then you will need to provide them with all of these necessary documents. In order to ensure your taxes are completed accurately, you need to know which documentation you should have in hand prior to filing. Below is a list of common documents that are required when completing taxes:
- Income: Any paperwork that shows your taxable income needs to be used when filing taxes. This is most commonly a W-2 or 1099, however any retirement, rental, savings, interest, or dividend income needs to be recorded as well.
- Expenses: You will also need to reference any expense records such as receipts or invoices. If you are a freelance worker, you can keep receipts and deduct certain business related charges such as mileage or office expenses from your taxable income. You should also retain documentation relating to charitable donations and student loan interest charges. Recording these expenses will actually benefit you!
- Personal Information: In addition to your income and expense documentation, you will also need the personal information of your dependents and spouse (if applicable). Full names, date of births, and social security numbers should all be readily available.
Tip #2-Get Organized
The second step in having a stress free tax filing experience is to be organized. In order to have an accurate tax return, you will have to refer to all of the required documentation listed above. Having an organizational process throughout the year for your paperwork will allow you to take control and be better prepared when it comes time to file your taxes. Example of organizational methods include but are not limited to:
- Files: Using an accordion folder, file folders in a filing cabinet, or a similar method, you can label your documentation by category so it is easy to find and readily accessible. It is important to find a filing method that works for you and your individual needs. An example of this could be keeping all of your bank statements or 1099-INTs in a file labeled “Bank Documentation.”
- Digital Copies: You can choose to receive a majority of your important tax forms by email or via paperless options. Having a digital copy, allows you to access the document from anywhere and also gives you the option to print a hard copy for your physical files. Another benefit to choosing paperless documents is that you no longer have to worry about losing or misplacing an important form.
Tip #3-File Early
Between fear of owing the IRS money, or the fear of messing up a return, many people hold off on filing their annual taxes until the deadline has nearly arrived. To avoid added stress, it is best to file taxes sooner rather than later. Here’s why:
- If you are going to owe taxes, whether you file early or late, you will still owe. At least by filing taxes early, you can create a plan of action for how to pay the IRS and/or request an extension if needed.
- Filing early can help you avoid becoming a victim to identity theft via tax fraud. Identity theft via tax fraud is when someone illegally files a tax return under your social security number. Unfortunately, you won’t know if someone has filed a return with your SSN until you personally go to file and receive the gut wrenching notification that the IRS has already received a return in your name. Filing early will lower the chances of tax fraud happening to you as most of these crooks attempt to file returns as soon as the tax season begins.
Tip #4-Know Your Options
Now that you are prepared to file your taxes, it is time to determine your method of filing. Your individual situation and the complexity of your finances should be considered when making this decision. Before tax season even begins, have an idea of how you plan on filing your taxes. This will help to ease the stress of filing.
- Independently: If you have a rather straight forward tax return with no unusual circumstances, you may feel comfortable enough to file your taxes without the help of a professional. If you go this route, it is best to e-File. Filing your taxes electronically will ensure the IRS and state receive your taxes timely and process a return—if applicable—much sooner than those returns filed by paper. Majority of those who e-File will receive a refund twice as fast as those who sent in a physical return. There are many software services available to assist you with simple returns for a minimal price.
- Prior to choosing to file independently, research the top tax filing vendors and determine which is best for you. If you are employed through a large company, you may be eligible for discounts with certain vendors. It is best to check with your HR department to see if they offer these benefits.
- Professionally: In the case that you don’t feel comfortable filing your own taxes, you may wish to have a professional assist you in the tax preparation or filing process. Accountants can assist you with more complex returns and ensure you account for all of your income, tax credits and deductions. CPAs and accountants that are enrolled agents with the IRS can also represent you in the case that your return is being audited. Having a professional to assist you with your taxes will also alleviate some of the stress of filing as they can answer any question or address any concern you may have.
Just the thought of tax season often sends a wave of dread through many individuals. The unknown of messing up your return or owing the IRS money creates added stress to taxpayers. Taxes aren’t going anywhere. Take control over your tax situation and get prepared to have a stress free tax season.