Uuuugghhh. It’s THAT time of year again. I don’t like it. I kind of dread it. The results really aren’t negative at all. But I still find ways to put it off. It’s more just the process. Or maybe it’s my attitude about it. But I don’t like it. It’s tax time.
You know the saying – there are only two certainties and they are death and taxes. As long as you have any taxable income over $600, you get to report it to the government so they can confirm you have given them enough. I’m not against taxes. They help with good things like services, roads, schools, and more. I just don’t like the process of filing my taxes. There are times I might be willing to do anything up to death itself to avoid working on my taxes.
Whether you feel the same way or not, I want to share a few tips that can help you get through your taxes and do it well.
Use a professional – I know there are programs and websites to help you do it on your own. Many people do and end up ok. If things are at all wonky in your finances (and perhaps even if they aren’t), I’m going to recommend you use a professional to do your taxes.
A few years back, I took my taxes in to ‘my guy’ and watched as he put everything in. After a quick check, he showed me what my refund was going to be. “That’s probably what you would get back if you did it yourself. Now let me go to work.” He asked a few more questions, adjusted a few things (all legally), and worked his magic. In the end, I ended up with several hundred dollars more in my pocket. Sure, I pay more, but my gain that one year paid for a few years of his service.
As an added bonus, the good ones are willing to back you up should the IRS come knocking. In reality, only about 1% of returns get audited, but if you are at all self-employed or a small business owner, your chances go up significantly. Now you have someone on your side.
Be organized – This is where my wife’s personality really becomes an asset (and, if she is reading this, certainly not the only time it’s an asset). She is very organized, bordering on OCD. Even using ‘my guy’, I still need to have everything in line and put together. My wife’s collecting and collating of the documents makes my job much easier.
One of the benefits of using ‘my guy’ is that I get a tax organizer every year in January. It shows what I had last year and gives me blanks to fill in with this year’s numbers. Using that, I know I have everything needed and don’t need to make trip after trip to drop paperwork off.
Get it done – Did you know you can file a no-questions-asked extension if you don’t get your taxes done on time? You can. But especially if you are getting money back, it will cost you. I’m not talking about a fee to do it. Rather, the longer you wait to file, the less time you have that money in your hands. If you are going to use it to pay off debt, that’s more interest you will pay. If you are going to invest it, that’s less interest you will make. If you don’t get it done and don’t file for the extension, there will be an additional penalty.
Also, the closer you push that magic deadline of April 15th, the less cushion you have should something go wrong. Perhaps ‘your guy’ gets busy and can’t fit you in. Or maybe the program you are going to use to do it on your own goes down. 11:00 PM on the 14th? You’re in a pickle.
Get it done.
Know what’s allowed – So many people I talk to think they should be self-employed so that they can write off meals and their home office. That’s a great idea, but….. You can actually, at best, only usually write off 50% of your expense for meals that are specifically for business purposes. That home office? You have to be able to document that it is only used for business purposes. Mileage? Office to business appoints is deductible. Home to office is not. Getting something wrong could really cost you.
Generally any donations to a not-for-profit with a receipt are deductible. If you have made any major purchases like a home or car, it may have included deductible expenses. Even major purchases around the home may involve tax deductions. Save your receipts and have your tax prep person look at them for sure.
Check your attitude – I know; this is the one I need to work on most. After all, if you are paying taxes, it means you are making money. That’s a good thing. A positive attitude will also help you get it done quicker and better. And getting it done means I don’t have to worry about it for another year and can move on to better things.
Start on next year – Regardless of where you are at with the current year’s taxes, start on next year’s now. Start saving the receipts that you may need. Get the filing system put together. Evaluate your withholding amount and how that ended up for last year. Some like to keep the withholding high so they get something back at the end of the year. Others will keep the withholding amount just low enough so that they can use as much as possible now rather than letting the government hold on to it. Either way, have a plan.
At the Center for Financial Resources, we don’t help with tax preparation. We send you to the tax experts for that. But if you are having trouble staying on budget after Uncle Sam takes his share, or are trying to figure out what to do with that monster refund you are getting, we can help with those things. Give us a call at 605-330-2700 or connect online to schedule an appointment with us.
If you hear groans of pain coming from my direction, don’t worry. It’s just me getting my taxes done.
written by Breck Miller
images courtesy freedigitalphotos.net