April 15 is a dreaded day for many people simply because it’s the deadline for filing personal income taxes. The truth is this day doesn’t have to be ominous or overwhelming. By getting a jump on your income tax preparation and savings, you can help take the stress out of tax day.
Here are 7 strategies to help plan ahead and take the stress out of tax day.
1. Gather your records early
Take the time to gather all of your documentation beforehand so you have everything you need to get started. Don’t wait until you sit down to complete your taxes to do this. When tax documents come to your inbox (snail mail or email), put them in one folder. This folder can be electronic but make it easy to find.
I suggest using the cloud to store these documents so it’s easily accessible.
Don’t forget to gather your past tax returns as well. These can provide valuable insight into where you can save money on your taxes in comparison to previous years.
2. Determine how you’ll complete your return
You can prepare your own taxes or hire a tax professional. There’s nothing wrong with either way. It’s up to you which way makes you feel more comfortable. If you feel overwhelmed by tax deductions and tax forms, then by all means outsource it.
But don’t wait too long to find the right tax professional for you. Initiate your search for a suitable tax preparer as early as you can. If you wait until the last minute, you may find that the preparer you chose is no longer available to help you.
If you plan to file on your own, you can plan and prepare ahead of time by reading up on current tax law changes, tax credits, and deductions. There have been major changes over the past few years so it’s not always an easy task depending on your credits and deductions. But it is doable if you like to research and learn.
3. Use free resources for help
Look to government resources for help. The Internal Revenue Service website and local state tax authority websites are valuable resources for individuals seeking tax help. Use these free resources to your advantage to get some extra assistance while filing your taxes.
Not to brag here, but I have lots of free resources and articles on this website to help you as well. Don’t be afraid to search for professional and reliable resources to get the answers to your questions.
Here are some other great resources for you.
If you’re part of the military, check this out.
If you’re over 50, AARP has a free tax-aide program for moderate to low-income taxpayers.
Regardless of age, if you’re lower income, the IRS has a volunteer income tax assistance program available to help.
4. Plan for taxes
Don’t wait until tax time to determine if you’ll owe or not. Plan ahead and make sure to save for taxes throughout the year especially if you’re self-employed and typically owe vs. getting a refund. That way you won’t be scrambling to figure out a payment solution and this can help take the stress out of tax day.
If you estimate your taxes ahead of time, you’ll know what to expect. The IRS offers withholding calculators and other useful tools to help you determine what your taxes will be like prior to actually filing. This estimation will help you prepare for the actual filing, especially if you’ll end up owing money when you actually file.
5. Save for retirement
Contribute as much as you can to your tax-advantaged retirement fund. This will reduce your income even further, leaving you less of a tax liability.
While this isn’t the best solution for every taxpayer, it can be a helpful one.
You can possibly contribute to a traditional IRA and that is tax-deductible now.
You might even qualify for an extra tax credit! Did you know about the retirement savings contributions credit (aka saver’s credit)?
Take the stress out of tax day, reduce your tax bill and save for retirement. What’s not to like?
If you’re self-employed, you’ve got options. Want to learn more about retirement savings options and tax savings? I’ve got you covered.
6. File early if you expect a refund
Why? Because the sooner you file, the sooner you’ll receive your tax refund. You can file in January when the season opens and as soon as you have your paperwork together.
Don’t be too eager though and file before ALL your tax paperwork has arrived at your inbox. You don’t want to have to amend your return later. To avoid an amendment be certain you have ALL the necessary documents necessary.
7. E-File your return
There are a number of benefits to e-filing, or electronically filing, your tax return. For example, most E-file software will compute tax credits and deductions for you based on the information that you put in.
The added bonus of e-filing a tax return, you’ll get your refund much quicker than mailing your return.
I don’t know anyone who wouldn’t want to receive their refund as soon as possible.
The Bottom Line
The best way to get the most out of your income taxes is simply to get a jump on them early. With planning and preparation, you can maximize your deductions and simplify the filing process without stressing yourself out along the way. So what are you waiting for? The time is now to start planning and to help take the stress out of tax day.