Even though April 15th is well behind us, I tend to think of tax preparation as a year round project. If you have the experience of throwing a bunch of things together at the last minute the day before the deadline, here is a set of tasks you can do throughout the year to make filing your taxes for next year stress free and easier than ever.
Know quarterly deadlines and estimated liability
If you are self employed, or have regular income from investments or other sources where there is no regular withholding, it makes sense to do this throughout the year anyway. The reason for this is that the IRS expects their money for taxes throughout the year, not just when you file at the end of it. So, if you sold property for more than it was worth, or have income from investments or your business where you don’t get a regular paycheck and have money withheld, it will save you a lot of hassle and potentially some tax penalties to stay on top of that throughout the year. Most accountants are happy to give a preliminary look at your tax position toward the end of the year for a nominal fee, and it might provide some peace of mind knowing that you’re well prepared for tax time.
Open an account with the IRS:
It’s not widely known, but you can open an account directly with the IRS through their website (irs.gov). It allows you to see your tax records, make payments, and verify your amounts due. Also, a number of years ago, fraudsters, using stolen identities were filing fake tax returns and collecting refunds that were not theirs. If you have an account with the IRS, you would be notified about this activity, which is just one more tool you can use to fight identity theft. And it’s completely free and easy to establish.
Keep a file of tax-related items
I have both a paper and an electronic folder of anything tax related that I keep. Any charitable contributions, local tax payments and miscellaneous tax forms (W2s/1099’s) that come to me throughout the year get filed there. If you’re not sure about what might qualify as a tax related item, it will most likely be limited to those things described above. However, at the start of the new year, you’ll be inundated with tax forms and you’ll need a place for them to keep safe. One handy tip is to keep handy a copy of your previous years’ return, or worksheet if you use a professional accountant. That way, you’ll be able to see what you received last year and know you have a complete set of data before you file. That could save you from having to make an amended return filing if you missed something the first time around.
Prepping for taxes is no fun, and any hope of having a simpler tax system is probably off the table for the foreseeable future, if ever. Hopefully, the above info will help make the process a little less painful, and prevent the April rush to get things done on time.