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It happens every year, tax season. For most people it is a time of scrambling to get everything organized and put together in order to file their taxes. Here you will find tips and suggestions to make this tax season the easiest one ever and be done before the dreaded IRS deadline in April.
Start earlyIf you are doing a simple tax return, meaning you don’t itemize your return and have no investment income or losses, then you will only need your W-2’s which will be mailed to you no later than January 31st. If you are itemizing your tax return, then go ahead and have all of your deductions listed out on a “cheat sheet” for easy access once you have a method of filing nailed down.
Itemizing Your DeductionsFor those individuals who will be itemizing their deductions now is the time to start planning. As discussed before, you will need to go ahead and pull your information together as soon as possible. The most commonly used deductions that you will need to gather information on are charitable donations, mortgage interest paid for the year, medical expenses, car tag renewal fees, and state sales tax for the year.
If you received self-employment income, you can also deduct a portion of your monthly utility bill, cable bill, internet bill, cell phone bill, and other business related expenses. Keep in mind though that you can only deduct a certain percentage based on the size of your office in relationship to your total size of your house. For example if your office is 10% of your home you can deduct 10% of your bills.
Figure out how you want to file your taxesAs a taxpayer you need to figure out early in the year how you plan on filing your taxes. You have more options than ever to file taxes this year. Three popular ways of filing your taxes are by using tax software or a tax website, using a tax preparer like H&R Block, or an independent CPA.
If you have a basic tax return, one in which you only need to report income from a job and you are not itemizing deductions then doing them yourself is the quickest cost effective way to do it. A great place to start is the IRS Free File section here: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free(available Jan.22). At this IRS website, you will be able to choose a free tax filing program recommended by the IRS so you can eliminate less reputable websites or software providers. In my experience, I have always had great success using TurboTax for a basic return. TurboTax was always straight forward and never ran into an IRS problem. The advantage of the software is the ability to have total control over all the information you enter and the cost effectiveness to file. The downside is if you are ever audited it is going to be on you and you alone to provide the information to the IRS.
Dealing with a basic tax outfit like a H&R Block can provide you the advantage of having someone handle a basic return and being there in case of an audit. The downside is they will take a percentage anywhere from 10% - 20% of your total return for compensation which will hurt your bottom line.
CPA’s are best used for heavy itemization tax returns and for special tax circumstances. The great news is that with a CPA you can sleep well knowing your taxes are being done effectively. The downside is they are the most expensive often charging a flat fee most of the time in excess of a general income return.
If you have a more complex return that requires a high amount of item deduction or special tax circumstances then hand it over to a professional. Remember it is your name on the line so if you feel uncomfortable about dealing with a high amount of deductions or a special tax situation give it to a CPA and let them figure everything out for you as that is what they are paid to do.
Don’t stop the momentumOnce you have even a little bit of required tax information and a certain way of filing your taxes then immediately start the process. This is the biggest key for success, which is starting early. Furthermore, the biggest issue people run into is the initial “enthusiasm” of doing their taxes then put it on the back burner and before you know it is April and you still are not done. My rule of thumb is once you get a tax document then go ahead and enter that into your tax program or give it to the person doing your taxes.
Error check and then error checkThe most common way you will ruin your tax season or create an audit situation is by not checking your work. All tax programs will do an error check but it is ultimately up to you to make sure every number has been entered correctly. Even if you have someone prepare them for you, review all figures to ensure everything is correct. If you have given yourself enough time to review your return then you have enough time to review your work. Remember it is your name on the line not your CPA’s or your tax software’s.
What if something goes wrong?The worst fear of a tax payer is either an audit or filing their taxes incorrectly. Not to worry as everyone makes mistakes. I myself have had this happen when my state failed to send me paperwork within the mandated time frame. The IRS offers a free tax return amendment form included in most tax software suites. Simply fill out the amended paperwork along with reason for the change and that’s it. The IRS will send you a notification that they have received your changes and any calculated differences that you owe.
By following these easy steps you will have no problem this tax season. Just remember it is all about starting early and finishing strong. Now it’s your turn, did I miss anything? Do you have a tip that has worked for you making your tax season easy?
Additional ResourcesMake Life Better and Your Wallet Fatter with Tax Credits10 Tax Deductions You Cannot MissThe Big 0: Why It’s a Good Idea to Break Even With the IRSTax-Free Income: 10 Ways to Avoid Paying Taxes
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