If you’re like most Americans, tax season is your favorite time of the year. Well, maybe not. Actually, tax season is probably one of the most dreaded times for Americans. Right after the new year, it’s a combination of waiting for all of your tax documents - W-2’s, 1099’s, filling out forms - and making sure you have enough time to file your taxes before the deadline.
For those that hate tax time, most of the dread is due to not being organized and prepared. It can leave you wondering if you’ve given your tax preparer the all the information, let alone correctly. And if you’re preparing it yourself, whether you’ve left anything out.
Whether you’re filing a simple return or a complicated one, tax season doesn’t have to be crappy if you’ve done your part to properly prepare. Take a look at these things you can do to stay ahead of the game.
#1: Have a Designated Place and Gather your Paperwork
As forms begin to roll in, it’s easy to misplace them as you wait for other documents to come in. Pick a designated spot and keep a folder for all of your tax documents. Each time a new form comes in, you know exactly where it should go and can simply stick the document in the folder. For those who want an added protection to ensure no documents are missing, scan each tax form as they come in and keep them on your computer for easy access should you misplace a form.
Documents that come in the mail are not the only documents you’ll need to gather. Make sure any receipts for charitable contributions or business expenses have been saved. Consider using Expensify to keep track of all your purchases and receipts. Platforms like Expensify and others also allow you to track mileage and help create expense reports quickly and conveniently.
According to the IRS, if you have a small business, there are many supporting business documents you’ll need to provide.
The following are some of the types of records you should keep:
Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts.
Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this may include the cost of all raw materials or parts purchased use to make the finished products. The supporting documents should show the amount paid and that the amount was for purchases to avoid any discrepancies.
Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and a description that shows the amount was for a business expense.
Travel, Transportation, Entertainment, and Gift Expenses If you deduct travel, entertainment, gift or transportation expenses, you must be able to prove certain elements of expenses. For additional information, refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Assets are the property, such as machinery and furniture that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets.
Employment taxes. There are specific employment tax records you must keep. Keep all records of employment for at least four years. For additional information, refer to IRS Recordkeeping for Employers and Publication 15, Circular E Employers Tax Guide.
#2: Decide Who Will Prepare Your Return
Who will prepare your return? A friend, company, family member, or yourself? If you’re going to prepare your own return, it’s important for you to start gathering all your documentation as early as possible. You’ll also need to make the decision on what software program you’re planning to use to file your taxes. Take a look at these reviews according to the Simple Dollar: 5 Best Free Tax Software and Best Tax Software.
#3: Determine What has Changed
As you prepare to file your taxes, it’s important to note major life events that have happened.
- Did you get married or divorced?
- Did you have a child?
- Are you no longer claiming a child as a dependent?
- Did you buy a house, investment property, car, or boat?
These are just a few of the questions you should ask yourself since they will affect your taxes. In some cases the questions aren’t as black and white and might require additional research or extended time. Be prepared to file an extension, if needed.
#4: Study Up on Additional Information
If you’re a homeowner, did you know that you may get some pretty sweet homeowner tax breaks? Mortgage interest and points are two of the deductible items you can deduct from your taxes. Take a look at the IRS’s Credits and Deductions page for a variety of items that you may be able to deduct or receive credit.
We know that tax season can be stressful, and we understand it’s a pain, but we also know that it has to be done. So, why not do it right, early and with as much preparation as you can. We may not be able to file your taxes for you, but we’re here to help lighten the load as much as we can. Make contact with us today and we’ll do our best to lead you in the right direction!