April 15th is a date most Americans dread because of the headache caused by tax season. That headache is exasperated because you don’t think about preparing your taxes for most of the year. Here are the things you’ll want to do to make preparing your taxes easier.
Year-Round Tasks to Make Tax Season Easier
While tax season only comes once a year, a lot of preparation focuses on year-round tasks. Be sure to work with a qualified personal tax professional, like those at G&R Bookkeeping Services, to plan your approach strategically.
Decide How You’ll Handle Preparing Your Taxes
The first step is deciding how you’re going to prepare your taxes. Will you do it yourself or use a tax professional? What about keeping your records straight throughout the year? Do you want the headache or allow someone else the honor?
Be Careful of Tax Fraud and Scams
You have either heard the stories or experienced for yourself the calls of someone claiming to be the Internal Revenue Service, or IRS. These generally suggest you owe money and that you have a warrant out for your arrest. The only way to take care of it is to call the person back to settle the matter urgently.
One of the most important things to understand is that the IRS will never use predatory tactics like this. They will send you letters, including certified mail, to alert you to problems with your IRS account.
Another common issue is tax preparers who promise larger refunds. This kind of promise may mean someone who’s willing to bend some tax rules.
The difficulty with this is that you are ultimately responsible for your taxes, regardless of whom you paid to prepare them. If that person is unscrupulous in their approach, you could end up paying the penalties, at a minimum.
Double-Check Your Tax Withholding
Take a few minutes to double-check your tax withholding from your paycheck. Make sure there is enough withheld in federal taxes from each of your paychecks so that you don’t end up owing the IRS. A great way to check this is with the Tax Withholding Estimator on the IRS website.
Maximize Your Deductions
The changes to the tax laws and the available standard deduction have made it more challenging to make itemizing worth the effort. If you don’t have more deductions than the standard, you simply take the standard and move on.
Strategic taxpayers have learned the art of batching their deductions for maximum effect. This means making more contributions in a single year or paying January’s mortgage payment at the end of December. Work with your tax professional to determine the best strategy for your situation.
Contribute the Maximum Amount to Your Retirement Accounts
Contributing to your retirement account is crucial for planning for your retirement and strategic for your taxes. If your retirement plan is a tax-deferred account, contributing more reduces your taxable income for the year.
Take Your Required Minimum Distributions
If you are of the IRS’s retirement age, which is currently 72 years old, then you’ll need to take your minimum distributions from some retirement accounts. Failing to do so results in a penalty of 50% of whatever was not withdrawn. In other words, it doesn’t make sense to keep the money in the account only to lose it.
Respond to IRS Auditors
Finally, be sure to respond to any official correspondence from the IRS, especially from an auditor. Any replies should be made in writing and sent via the United States Postal Service. This allows you to track the delivery of the correspondence, plus it gives an official record of when it was sent, if anyone questions the timeliness of your response.
Be sure you’re ready for this tax season. If you’re planning to enlist the help of a tax professional like G&R Bookkeeping Services, call to get your appointment scheduled early. This allows you to get your tax refund sooner, plus avoids potential delays and penalties.
