April 15th may well possibly be the most dreaded day in America. It is otherwise known as Tax Day. Many of us often go into a mad scramble the weeks or even days leading up to April 15th, trying to collect tax documents and getting all our questions answered. It’s a vicious cycle that seems to happen every year.
Do you want to change that? Then start early this year.
It’s not too early to start thinking about tax day even though April is still a few months away. Getting a head start now will help relieve the stress you go through every year trying to file your taxes and actually make it quite simple. There are plenty to things you can do now to prep. Consider these 5 action items to help you prepare for tax season:
Have Your Personal Information Ready
Filling out personal information correctly on all your tax forms is vital. Otherwise, you’ll risk not having your taxes filed correctly. This might sound simple but it’s a common mistake that happens to too many people every year. You should have your social security number or tax ID number ready, along with your spouse’s. If you are claiming anyone on your taxes, have their information as well. You should also have your previous year’s tax return handy for reference. If you are working with an accountant, you can have them review your last three years’ tax returns (you have up to three years to file an amended tax return).
Collect Your Income Documents
The most important piece to your tax puzzle will be your income documents. This is commonly in the form of a W-2 or a 1099 (if you are an independent contractor). You should receive these documents from employers by January 31st. If you don’t, you should still report the income. Also collect documentation from other sources of income, such as rental income, dividend income, and unemployment income.
Determine How You Are Going to File
Some prefer to do their taxes themselves while others choose to work with a professional. It’s all really a matter of preference but make your decision early. As you get closer to tax day, tax professionals are harder to come by and may charge you more. If your taxes are fairly straightforward, you might decide to use a program such as TurboTax. Otherwise, consider hiring a professional. Even though it might cost you more upfront, their expertise can help you save a lot on your taxes.
Compile Your Receipts for Business Expenses
Your taxes are a little more complicated if you are self-employed or an independent contractor. You’ll have to fill out a Schedule C and list all your business expenses. You should do this carefully, as being thorough can help reduce the amount of taxable income you owe. Collect your receipts and proof of expenses. Keep in mind – expenses should be within reason and business related.
File for an Extension If You Need More Time
If you think you are going to miss the April 15th deadline, you still have some wiggle room. You can file for an extension to get everything ready by October 15th. However, you still have to pay the taxes you expect to owe by April 15th.
Even though it’s still early, tax day is right around the corner. Save yourself the trouble by being proactive now and getting everything you need in order. You’ll be thanking yourself later on.