Hey, I didn’t say I’d eliminate your headache. Taxes are still a pain in the you-know-what. But over the years, I’ve learned that a couple of key measures we take personally really help when it comes to tax time.
My guess is 75% of you will file sometime in the next 20-30 days. The other 25% will either procrastinate until April 14th (hey, I was in that boat once, too!) or have braved it and filed pretty early.
With tax season in full swing, let me give you my “Top 4” tips for 2010:
What is pre-filing? No, it’s not something you can do with the IRS. It’s what I do with my online e-Filer as soon as I get my W-2’s in the mail. This tells me, very roughly but very quickly (5 minutes or less), whether I am likely to owe money or get money this year.
Why is this important? Well, if you owe money, you’ll probably want to wait as long as possible to file taxes (or file, then pay before April 15th). You’ll also want the heads-up in case you need to come up with the cash.
On the other hand, if you are getting a refund, you’ll probably want to file as soon as possible. You’ll also want to start thinking about how you’ll use it so it’s not a complete surprise and waste when the check comes in.
Either way, you’re also able to modify your W-4’s one to three months earlier based on “feedback” (refund/payment) from last year. That will make next year’s taxes more to your liking!
Even if you normally do your taxes with an accountant or brick-and-mortar service, you can still start a return with a service like Turbo Tax Online, and preview your payment/refund for free.
Try it this year! Even if it’s a little late, as soon as you get the “bulk” of your income and deduction documents, get them into a tax system. Get an idea of where you stand, even if further income or deductions are on their way. If your taxes are similar year-to-year, you should get a “feel” for what else is coming and whether it’ll affect you in a good or bad way.
Yeah, no kidding. Well, why is it so hard for people to do, then?
Keep a catch-all folder on your computer and your desk for all tax documents coming in. That’s because some things now come in online, and some still get sent by snail mail!
If you do get something by email (usually it’s a notification, not the actual document), go to the website and pull your documents immediately (or you will forget!). Then save it in your computer folder for later.
When it’s time to do taxes, pull out both folders and cross-check your master account list (all of your known accounts and income sources) with what you’ve received. Is anything missing? (Believe it or not, I have had W-2’s go missing on more than one occasion!).
Being “in the know” on the latest tax code changes is important. And I don’t mean every single line of new law–but the major changes that happen each year.
One example was the home buyer credit that everyone talked about this year. Did you know debt forgiveness through foreclosure is now not considered income if certain conditions are met? How about the latest deductions for energy-efficient cars?
Being informed throughout the year helps you make better choices with your entire financial picture in mind.
Stick With One System
We’ve used Turbo Tax Online for as long as I can remember (eh…about 5 years). Staying with one tax provider is awesome, because last year’s information is automatically imported, so I don’t have to repeat myself (and it helps to cross-check the numbers!).
I’m familiar with the system and know how to navigate it to get the answers I want quickly (see pre-filing above).
Look for discounts through your bank or brokerage–both usually offer me some sort of % off the retail price on Turbo Tax, and I take full advantage.
What’s Your Favorite Tax Tip?
Well, there you have it–my top 4 tips for this tax season. How about you?
What is your #1 tax tip for your fellow Fiscal Fizzle readers? I can’t wait to hear it!
Photo by alancleaver_2000