Whether you are an individual or owner of a small business, preparing and filing federal and state taxes on an annual basis is a legal requirement. Generally, taxes are due by April 15 of each year, and you will receive most of your necessary documentation by the end of February.
This time of the year can induce stress for individuals as the tax code can be complicated and tends to change on an annual basis. Fortunately, there are various accounting tips that you can follow that will help to make your tax season more manageable.
One tip to follow to ensure your tax season is stress-free is to keep all of your tax records organized and in a specific place. This will include W2s and other tax forms, receipts, invoices, and any records needed to prepare your taxes.
An organized documentation system may not only save you time but can also reduce stress during tax preparation season. Once you have filed your taxes, you should keep all of these records on hand for at least 7 years. This will ensure you have them ready if you are ever subject to an audit or IRS review.
Read Up on Tax Law Changes
As previously stated, the IRS tax code will change a bit each year. While some years provide more drastic changes than others, there tend to be new deductions and credits that could be available to you to reduce your tax bill. It is helpful to familiarize yourself with the event changes to determine if any new tax codes apply to your situation.
This will help you be on the lookout for such tax codes when preparing your taxes or using any preparation software. If you’re unsure how to best familiarize yourself with the new tax codes and laws, you can consult with a local accountant who is informed of such changes.
You’ve probably heard this before, but it can benefit you to start the tax preparation process early. Generally, you will be able to start filing your taxes by the end of January or as soon as your tax documents are in your hands. You can begin by gathering the necessary documents that are required to prepare and file your taxes.
If you have questions or notice that you are missing information, you should have time to obtain the documents you need. You will also have time to review your work before you have filed. Further, there have been situations when the IRS has fallen behind on issuing tax returns and those who file early tend to receive their return sooner.
Estimate Taxes Throughout the Year
It is equally important that you spend time assessing your potential tax liability throughout the year. If you are a typical salaried W2 employee, your employers will normally start to take out deductions with your first paycheck if you filled out your W2 form correctly and claimed the correct number of deductions. If you use the proper withholding, you should have a minimal tax liability due when it comes to filing taxes.
If your salary fluctuates, or you are not salaried and don’t have taxes taken out of each paycheck, you will need to ensure you are properly estimating your taxes owed. Generally, you will need to send an estimated tax bill payment to the IRS each quarter throughout the year. Doing this can help you avoid being surprised by a high tax bill. If it’s helpful to you, set aside your estimated taxes owed in a savings account until you pay your tax bill to the IRS.
Hire a Professional
Another great tip to follow for your upcoming tax season is to outsource your tax preparation needs to a professional. No matter how organized you are, there are usually complexities and challenges that accompany filing taxes. This tends to be more complicated as you incur new deductions and take advantage of new credits.
A local accountant and tax preparer can prepare your taxes in accordance with the tax codes set by the IRS. They can also identify any tax breaks that you may qualify which may result in a higher tax return or fewer fees. Working with a local tax accountant can ensure your taxes are prepared correctly and that your tax liability is minimized.
Preparing and filing your taxes is a requirement each calendar year. This time of the year can feel stressful and hectic as you try to stay current with the tax laws or pay your tax bill. There are various tips that you can follow throughout the year, and at tax time, which can help you make this tax season more manageable.