We realize this post isn’t about dental hygiene, flossing, or wisdom teeth. We also realize that the dreaded income tax day has come and gone. However, in the spirit of tax season we decided to shake things up and feature an article that will help you get a leg up on next year’s taxes. After all, reducing stress will also decrease teeth grinding, so we see this article as a win-win! Feel free to let us know what you think.
5 Steps to Prepare for Tax Season Early
After tax season, most people heave a sigh of relief, but the pressure you usually experience during this season can be avoided if you know to how to prepare early. Follow the tips in this article and by the time the little reminders about filing your taxes arrive next spring, you will have very little to worry about.
No matter how many alpha-numericly labeled forms you have to fill out like the 1099s from the bank or the W-2s sent by your employer, you will be fully prepared for the task. Whether you decide to make use of tax software online or one of the popular mobile apps designed to make things simpler, you will have all the documentation and data required to speed up the process.
Early preparation will help you to avoid costly mistakes that can cause you to lose money or receive unpleasant letters from the IRS. It will also help you to double check all your tax documents so you can enjoy the benefits of additional savings and peace of mind. In addition to the help you can receive from tax accountants and software, here are five effective ways to prepare early for tax season.
Develop a Better System For Each Tax Season
Learn from any challenges you faced or mistakes you made during this last tax season. For instance, you may have had some trouble summing up your gains or losses, or providing receipts for tax deductions. Instead of waiting until you receive fresh reminders from IRS, you should improve on your record keeping and accounting. Create a special place where you will file all tax related documents that come in during the year so you can easily find them.
Put Your Receipts Together
To receive maximum tax returns, you should itemize all possible tax deductions you can benefit from and start putting all your receipts together in one place. Whether they are just a few dollars or more, deductions like out-of-pocket charitable contributions, students loan interest and moving expenses to a new job are some of the commonly overlooked tax deductions. Keeping all of these receipts in order throughout the year as you receive them will save you a boat-load of time come next April.
List Out Your Income Sources
Before the tax season comes, create a personal list of all your taxable income sources. Don’t depend on the random arrival of various tax forms from others. Your income sources could include: your employer, interest on savings, shares, and mutual funds. Using your personal income list will help you to prevent the late arrival of forms when you felt you had completed all your income tax forms. This will also give you an idea of who you may need to contact in order to obtain these forms in a timely manner if you have not received them by the time you are ready to file.
Make IRA Contributions
Don’t allow the nature of IRA contributions to encourage you to procrastinate. Even though you can delay this contribution until the deadline for filing taxes, and it will still be accepted, we do not suggest you do so. You can reduce your stress level by removing this additional task from the list of things to do during the tax season. Get it done early; there’s no reason to wait.
Reconsider Withholding Instructions
Traditionally, it makes sense to minimize withholding and pay it during the tax season, so you can keep the money with you for the whole year. However, with the extremely low interest on money kept in a savings account, you should adopt a different approach. Change your withholding levels so that you can receive a tax refund that you can deposit as a lump sum, which will earn a much larger sum of interest.
In short, the information provided here will help you to develop a system that will speed up the tax documentation process even before the tax season arrives. These tips will also help you to keep all your tax-related records properly throughout the year. Why not prepare now and decrease your stress later? Who knows, you just may be able to file early next year.