5 Ways to make it less painful
Do the words "tax season" make you groan? Most people do not look forward to doing their taxes. Between the paperwork and the math, it's no surprise this activity is not a favorite—but that doesn't mean tax season has to be outright painful, either. Here are some tax season tips to help make filing your taxes less of a burden.
Keep Paper Tax Documents in a Designated Place
There's nothing worse than having to sort through multiple piles of mail to find a W-2 or 1099 minutes before your appointment with the accountant. You wonder if you accidentally threw it away, or if someone else in the family moved it. One of the best tax season tips is to have a designated spot in your home for tax documents. This could be a folder in your file cabinet, or it could be a basket on the kitchen table. Whenever you get a tax document, put it in this spot. Then, you won't have to waste time shuffling through piles.
Keep a Digital File of Relevant Receipts
There are likely a lot of deductions and credits you could be claiming, but you need receipts as evidence of the relevant expenses. Saving physical receipts can be messy and cumbersome. It's much easier to just snap a photo of each receipt you think you may need come tax time, and then keep all of these receipts in a specific photo album.
There are also receipt storage apps with additional features you may find helpful. Some apps sort the receipts by date or allow you to quickly categorize them. Either way, when tax time comes, you can either reference these receipts yourself or send the whole file to your tax preparer.
Start Early
If you file your own taxes, get started as soon as you have all of your W-2s on-hand. If you have a tax preparer file for you, make your appointment early in the season before they get busy. If you call on April 14th, they may struggle to fit you in.
Invest in Tax-Advantaged Accounts When Possible
Sometimes that tax season pain comes in the form of a larger-than-expected tax bill. You can help keep your tax bill down by investing in tax-advantaged accounts when possible. For instance, you can invest in a Traditional IRA or 401(k), or if you are self-employed, a SEP IRA. If you are saving for a child's education, make sure you are doing so in a 529 plan. These steps will reduce your tax burden overall. In some cases, you won't have to pay taxes until you pull the money out, and in other cases, you may never need to pay taxes on the earnings at all.
If you're not sure what tax-advantaged investment accounts are best for you, seek advice from a financial advisor. They can help you create a personalized investment plan that eases your tax burden.
Don't Make Plans Based on a Presumed Return
Sometimes people assume they will be getting a certain amount of money in their tax return, so they make plans for spending that money. Then, they don't receive as much back as they expected, and they're unable to follow through with their spending plans. To avoid this sort of stress, try not to make plans based on your presumed return. Wait until you have it in-hand to decide how you'll spend it.
With these tax season tips, you'll reduce your stress levels and have an easier time enjoying life in the springtime. It's a lovely time of year—too lovely to sit around worrying about taxes and refunds!
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