Here is Credit Sesame’s list of ten ways you can make tax-filing next tax season less stressful.
For many taxpayers, after they get through the chore of filing their taxes, the last thing they want to think about is next tax season. However, immediately after filing last year’s taxes is the best time to take steps that will make the whole process easier next year. Get started now and you’ll thank yourself when next tax season rolls around.
- Don’t wait until next tax season to get organized
- File away forms and receipts as they come in
- Keep a copy of last year’s return handy
- Move your financial accounts online
- Adjust your withholdings
- Create an emergency fund
- Set up direct deposit for refunds
- Start preparation sooner next tax season
- Take advantage of IRS resources
- E-file your returns
1. Don’t Wait Until Next Tax Season to Get Organized
One thing that makes tax season so aggravating is the annual scavenger hunt for all the paperwork you need.
Tracking down receipts, 1099s, W-2s and other tax forms can not only be time-consuming, but there’s also a certain amount of anxiety involved in wondering what paperwork you’ll need and where to find it.
Set up a system in advance. This doesn’t have to be complicated – it really just comes down to having a place to put information so you’ll know where to find it when the time comes.
The simplest way to think about it is as having a folder for your tax information. Whether that’s an old-fashioned manilla folder you keep in a drawer or a digital folder you set up on your computer, the first step towards making tax prep easier is having a place to put anything tax related.
2. File Away Forms and Receipts as They Come In
With your filing system set up, you’ll have a place to quickly put away the scraps of information you’ll need when tax time rolls around.
What kind of things should you be storing away? Receipts for deductible items like charitable contributions and business expenses can come in throughout the year. There’s often nothing you can do with them when they first arrive, so having a physical or digital tax folder allows you to put them where you’ll find them when the time comes.
Also, once January comes you should start getting tax forms listing your taxable earnings. These include W-2s for wages and 1099s for investment earnings. File them away as they arrive, so they’ll be ready for you when you’re ready to start your tax prep.
As simple as this sounds, filing things in a central location is a big step. It saves the frantic searching around for information that arrived weeks or months ago, and reduces the chances that you’ll overlook something.
3. Keep a Copy of Last Year’s Return Handy
Another thing to put in your tax file is a copy of last year’s return.
Your last tax return is a great reference you can check to see what deductions and sources of income you reported last year. This can help you spot whether there are any receipts or tax documents missing this year.
Also, refunds on last year’s taxes may affect your tax liability this year, so it’s handy to be able to look them up on your previous tax return documents.
4. Move Your Financial Accounts Online
Banking and investing online has a variety of advantages. One of these is being able to access information easily whenever you want it.
With online bank and brokerage accounts, you can access your tax documents at your convenience, or look back on a transaction that might have tax implications.
The little time it takes to set up an online account can pay for itself in the time you save not having to fumble around looking for statements and documents you’ve received throughout the year.
5. Adjust Your Withholdings
When you file a tax return, if you find you either have a large refund coming or owe a large amount of tax, it’s a sign that your withholding amounts were off.
Getting a large refund can seem like a windfall, and for some people it can actually be an effective saving strategy. However, it also means waiting months to receive money you’ve earned, and letting the government hold it without paying you interest.
On the other side of the ledger, a large tax bill may catch you short if you don’t have the cash available to pay it. It’s generally a lot less painful to have the correct amount withheld from your paycheck week by week rather than face a large tax bill when you file your return.
So, if your withholding amounts varied greatly from your actual tax owed, work with your employer’s payroll office to have your withholding amounts changed to better match your tax liability.
6. Create an Emergency Fund
The possibility of having an unexpected tax bill is one of many reasons you should consider setting up an emergency fund.
Having a bank account set aside for financial setbacks can save you from costly borrowing. Besides an unexpected tax payment, this can cover things like medical emergencies, car repairs or expenses while you’re between jobs.
7. Set Up Direct Deposit for Refunds
If you have a refund coming, why wait for a check from the IRS to arrive?
You can arrange with the IRS to have that money deposited directly into your bank account. That way you’ll get your money faster next year, and save yourself the step of having to deposit a check.
8. Start Preparation Sooner Next Tax Season
In most cases, you should get the tax documents you need from employers and financial accounts by the end of January. So why not start your tax prep then rather than wait till closer to the April 15 deadline?
Getting an earlier start will allow you to feel less pressure, especially if you have to get a question answered or track down some missing information.
Also, if you have a refund coming, getting an earlier start will put that money in your hands sooner. Not only does filing earlier start the IRS processing your return sooner, but often they turn things around faster early in the season before their staff gets swamped by the rush just before the deadline.
9. Take Advantage of IRS Resources
One of the things that slows people down in preparing their taxes – or makes them procrastinate about getting started – is the fact that the process can be confusing.
The IRS has resources on their web site that can help. Whether it’s information on the latest tax law changes, all of this year’s forms and instructions or tools to help you figure out your taxes, the IRS site can be a great resource. Consider familiarizing yourself with the site now, so you’ll know what resources are available for you next tax season.
10. E-File Your Returns
While you’re using IRS online resources, you might as well go ahead and file your returns electronically next time.
Doing this lets you avoid a trip to the post office at a very busy time of year, and saves you the anxiety of wondering whether your return arrived safely. It will also get a refund turned around to you more quickly.
Maybe you’ve already taken care of some of these ten steps, or maybe some don’t apply to you. However, if there are any of these that could help make the next tax season go more smoothly, now’s the time to take care of them. You’ll thank yourself next tax season and particularly on April 15 of next year.
You may also be interested in how to reduce next year’s tax bill.
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.