Late April is always a sigh of relief for procrastinating tax filers – we all know at least one. In order to help break the habit and avoid all the stress that the tax deadline can bring, you can begin planning for taxes at the beginning of each year.
Keep Your Documents Safe and Be Organized
It isn’t unheard of to put documents in a fire-resistant safe. This will be an easy place to remember when wondering where you put your tax documents and it will keep them safe from any disaster. This includes the previous year’s tax return.
If a safe seems like too much, having a filing cabinet with tabs to stay organized is another great way to save time in the end.
Be in the Know
The tax code is always changing, and it can be hard to keep up by yourself. Luckily, the IRS has a free subscription service that will warn you of any changes to the tax laws. On top of that, they even give out tax tips on how to save you money.
Develop a System
Developing a system for tracking all tax deductible activities such as mileage, child care, and charitable contributions is a way to remain headache free in April. Whether you use Excel, Google Docs, or some other software to keep track is entirely up to you, but these programs can be highly useful.
Life-Changing Events
Yes, a ring can be costly, but there are tax advantages that can make up some of the difference. If you do happen to get married and/or have a child, make sure to adjust how much is withheld from your paycheck. This involves filing a new Form W-4 (Employee’s Withholding Allowance Certificate) with your employer as soon as possible after each event.
Health Insurance Marketplace
In order to keep your taxes as simple as possible, changes in income or family size should be reported as they happen. This will then allow you to only receive the financial assistance you are entitled, therefore relieving yourself of more tax headaches at the end of the year.
Shop Around for a Tax Professional
Not all tax professionals are created equal. Don’t trust just any person on the side of the road that is flipping a sign and wearing a costume. You can find a qualified professional by using the Directory of Tax Return Preparers on the IRS website.
Look into Itemizing
It never hurts (at least physically) to look into itemizing instead of taking the standard deduction. This may take more time to look into, but it could save you in the long run, and even help out a charity or two with a contribution.
Plan For and Schedule Estimated Tax Payments
In order to make the most of your itemized deduction, make your 4th quarter estimate before 12/31. This will allow you to use the amount on the current year’s taxes.
Start Bookkeeping for Your New Business ASAP
If you qualify under this category, getting your money situation figured out right away is key to not getting into a tough situation later. Also, make sure you select the appropriate tax entity for your business (Sole Proprietorship, Partnership, Corporation, S Corporation, or Limited Liability Company).
Home Buyers Forms and Documentation
Keep all Housing and Urban Development (HUD) forms and documentation of the sale and purchase of a residence. The HUD forms keep track of closing costs, taxes, points paid, and other useful information. It is a great one-stop source for many financials that will be needed for taxes.
Conclusion
Stay organized and informed. If you do both of these, tax season will be much easier on you and your family.
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