As we all work (or scramble) to get our financial lives documented and organized by the looming April 15th, I thought it might be helpful to share a few tips for making this process easier next year. Here are five ways that you can get ahead of the game and soften the blow for yourself so that next year’s tax season is a breeze. Well, maybe not a breeze – but at least hopefully not a crippling wind. These tips come equally from the wisdom of my friends and colleagues, as well as from (sometimes painful) personal experience.
1) Pay quarterly instead of yearly.
Instead of paying your taxes all in one chunk every April, look at your yearly earnings, look ahead, and make an estimate as to what you’ll have to pay in the following year. Then you can sign up with the IRA to send in checks four times over the course of the year. Making your payments is far easier when you don’t have to do them all at once. For detailed instructions, CLICK HERE.
2) Set aside a portion of your income throughout the year.
This great tip came from a friend of mine a few years back and I’ve been doing it ever since. Try opening a savings account and then when you deposit your checks, always put somewhere between 10-33% of the amount into your savings account. If you can get into the habit of doing this and commit to leaving that money alone, it will be right where you need it when it comes time to make that tax payment.
3) Save all your bank/CC statements.
Saving receipts is a GREAT idea, especially heaven forbid if you ever get audited, but for adding up your deductions – simply highlighting amounts on all your bank and credit-card statements makes the process a lot quicker and easier (this is also a motivation to pay for things less often with cash and more often with a card so it’s documented).
4) Better yet, open a business bank account.
I can’t tell you how much easier my life has been since the day I created an LLC for my business and opened a business bank account and credit card all for my business. No more going through my expenses at tax time because they are all already contained and either on that credit card or coming out of that account. So easy.
5) Remember that you can deduct more than you think
. Do you really know EVERYTHING you can deduct? If you’re attempting to do your taxes yourself, here’s a link I found that has a pretty good list so you won’t miss anything.
6) Hire someone to do this stuff for you!
I’ve been having someone do my taxes for five years now, and every year I feel it’s completely worth the money. No matter how smart you are, a professional tax filer will know all the loopholes and tricks to both save you money and make sure you’re not putting up any red flags.