6 Ways to Make Next Year’s Taxes Easier
Here are six ways to make doing next year’s taxes faster and easier. Take care of them now while the memory of this year’s ordeal is still fresh in your mind, and you’ll be glad you did when tax time rolls around again.
1. Get organized
Creating a set of neatly labeled folders may not be at the top of your priority list, but it’ll save you or your CPA time later. It can also decrease tax prep costs and increase the possibility that you’ll get to take all the deductions you’re entitled to. At the bare minimum, create one new folder labeled with the current year. Even better would be to have multiple folders set up with useful categories like business expenses, medical expenses, education expenses, childcare expenses, tax-related forms, etc. Believe me, this can save a LOT of time.
2. Note your deductions
Write down the deductions you were eligible for this year, and those that you would probably have qualified for if only you’d had the proper documentation. Tack this note where you’ll see it every month as you’re paying bills. It will remind you to put any relevant documents in the folders you created earlier. (You did create those folders, right?)
3. Pay attention to unusual situations throughout the year
There are usually a slew of special tax credits and deductions out there each year that you might qualify for. But before you can qualify for them, you have to know about them. So if you do or experience anything out of the ordinary during the year, make a note of it and stick it in your tax file so that you can check for possible tax-related benefits when it comes time to file your taxes. Examples of unusual events might be buying a home or other large item, going to college, living in a disaster area, starting a business, joining a partnership, paying an independent contractor more than $600, winning a sum of money, receiving unemployment, moving for work, etc.
4. Know what forms to expect
You probably get a bunch of tax-related forms in the mail or in your email inbox during the first part of each new year. Know which forms you normally get so that you can reduce the likelihood of having to amend your return later when one last form straggles in.
5. Have enough taxes taken out during the year
Having enough taxes withheld from your job (or paying in enough in estimated taxes) helps prevent penalties and panic. If you’re not sure how much to have withheld, you can use the IRS withholding calculator to get a better idea. You can also give the IRS a call and they’ll help you get a better idea. Just don’t do that close to tax day, or you can expect massively long waits due to last-minute advice seekers. Which brings us to…
6. Start figuring your taxes early
And finishing your taxes early is even better (says she-who-has-still-not-finished-her-taxes.) Starting early and finishing early doesn’t have to mean filing as soon as possible, although it might if you’re expecting a refund and are sure everything is in order. Instead, it means that you won’t be stressed out at the last minute or anxiously wondering whether (or how much) you’ll owe. You’ll also make fewer mistakes due to rushing, and be much more likely to get an appointment if someone else will be doing your taxes.
Do you have any tips to add? Leave them in the comments and share the wealth.