7 Tips for Tax Time

by Ryan Yates

Tax Season Approach-eth: What's Your Strategy?

Although it may put your stomach in knots, April will soon be here. The best advice I can give you is to face your tax return head on without waiting until the last hour – even if you dread the worst.

Look at it this way, the sooner you submit your return, the sooner you get the good news or bad news. For me, it’s like a band aid. Good or bad, I want it fast.

If you get a refund . . . great! If you owe more taxes, it’s better to find out as soon as possible so you have more time to gather up the necessary funds. If you wait until the deadline to file and find out that you owe, you could have used the last 30-45 days do cut out unnecessary spending and get that money together.

If you wait til the last minute, you’re really just delaying the inevitable. This year, be smart about your tax situation, even if it’s not pleasant.

1. Identify Your Deductions

You always have the choice beterrn itemizing your deductions or taking the standard deduction. It’s necessary to know what expenditures are deductible before you start adding everything up. Online tax software has made it remarkably easy to go through your deductions. Most will tell you if you which deduction you should take.

If you want the complete list before you start your return, check out the IRS Topic 500.

2. Organize As You Go

Since 2011 is over and gone, it’s probably too late to encourage you to keep your receipts and stay organized. But that doesn’t mean you have to be unorganized as you fill out your tax return.

Separate out whatever tax documents you have kept up with throughout the year. Find last years return before you get started. Make notes of important information as you go.

3. Keep Track of 1099s and W2s

The law says employers must submit W2s to their workers by Jan. 31 of each year. If you’re self employed or have performed some sort of contract work, you’ll receive a 1099. When you get these in the mail, keep them in a safe place – preferably somewhere other than the kitchen counter next to the trash can.

4. Tax Software Costs Less

Doing your own taxes is usually cheaper than working with a tax professional. If you follow the steps provided by your software, it’s pretty easy to cover all of the bases – if you can handle the child-like questions. Many places even offer the basic version free, if your salary qualifies you to use it.

5. Sometimes You Need Professional Help

If you have multiple incomes, retirement accounts, investments, and rental or commercial properties, you may want to defer to the tax professionals. My situation has remained easy enough where I feel comfortable doing my own taxes. Also, when you have more tax ‘food’ on your plate, your less likely to incur an audit if you go with a well-known company. If you work with a reputable agency with high visibility, be on the lookout for deals and discounts.

6. Take a Long Look at Your Refund

Although a large tax refund feels incredibly fantastic, it usually means that you had too much money taken out of your paycheck. That’s money you could have used throughout the year in a savings account which would have earned you interest instead of the government using it.

Big tax companies use commercials showing very large tax refunds to entice the public to use their (usually expensive) services. The smartest thing to do would be to use that refund as an emergency fund or to pay down your debt, and then go to your employer to adjust your W4 so the right amount of taxes will be taken out in the future.

7. Spend Your Refund Carefully

When I received my first tax refund at about 16 or 17, I was ecstatic! I couldn’t believe than the government was giving me free money. But it’s not free money. Your refund isn’t a free stimulus check from the government.

A tax refund is just that . . a refund. You paid Uncle Sam too much, and now he’s giving it back. Instead of going hog wild at the mall or blowing your cash in some random fit of excitement, be smart with it. Start an emergency fund, a savings account, a retirement account, or a college savings plan. Sure,those aren’t the funnest things, but they’ll go a long way to keep you financially secure.

Photo By 401K

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