It’s no exaggeration to say that tax preparation is often one of the most dreaded civic duties. For some people, sitting at a computer entering figures can seem daunting. Others might not even know where to start, so they hire a professional to help. What some individuals may not realize is that filing income tax returns doesn’t have to be hectic or terrifying.
Here are a few tips to help you file your income tax form without stress.
Compile Your Income and Expense Data
Gather information about your income and expenses into separate files. You can create digital folders or organize your data with a manual filing system.
- Start with your personal and banking information.
- Create another file for income forms, such as 1099 from your clients if you’re self-employed or freelancing.
- Your personal expenses or deductions folder should include Form 5498 for outlays like IRA contributions and Form 1098 for mortgage interest.
- Business information should go in a separate folder from your personal financial information.
Use Software or Get Expert Help with Tax Calculations and Filing
Difficulty “crunching the numbers” is a common cause of tax mistakes that may attract an IRA audit or penalties. Consider using tax software if you find it too complex to work out all the details and capture all the pertinent financial information. There are affordable solutions that simplify the process for filers. Alternatively, hire a certified public accountant. Filers with annual incomes above $72,000 can use a free electronic filing system provided by the IRA.
Understand Taxation Basics
A little research can shed light on some of the most confusing aspects of your tax obligations. For example, knowing what form to fill out or what category of taxpayer you are, can give you a vital head start. There’s plenty of free information online about issues, like filing taxes as a part-time freelancer who is also employed at a monthly salary. It’s also important to learn about tax deductions that you’re entitled to.
Do It Early
By January 31, entities like banks, employers, and suppliers are required to send you pertinent W-2s and 1099 forms. This gives you ample time to prepare your tax returns and review everything. The earlier you submit your returns, the earlier you can receive your tax refund, if any. You could inject the funds back into your business cash flow. However, if you owe any taxes, you can delay filing until April 15. You should still prepare your taxes early, as you have all the information you need. Waiting until the last minute to gather all the required information can be stressful.
Get Ready for Next Year
To business owners, every fiscal year provides important lessons on various issues, including taxes. Maybe there are certain changes you can make to reduce your tax liability for the coming year? You can start planning for meaningful adjustments as early as possible. You can have folders for each category of tax information, from income and expenses to retirement contributions. This way, you won’t have to start from square one organizing your tax data for next year.
Once you master the process, tax filing becomes less wearisome and takes less of your time. If you are looking for resources to grow your company, contact our team at Economic Development Collaborative today!