6 Tips For a Pain-Free Tax Season
With the exception of CPAs who make a huge chunk of their income during tax season, most of us wish this time of year would never come around. Yet, it does, so we can reduce our pain and frustration by going into our tax preparation and filing with our eyes wide open and as prepared as possible.
These six tips will help a lot.
- Expect the best but prepare for the worst. The worst outcome is that later in the year you find yourself in the middle of an audit. Use this healthy fear to motivate you as you organize your documentation. Sometimes at the end of our filing we chuck everything into a file folder or shoe box and stick it in the closet hoping to never see it again. Be more thoughtful. As you tuck things away, be sure they are labeled and organized in ways that will make them easy to find in a “worst case scenario.”
- Be ready for the health insurance question. IRS regulations have turned your tax preparer into an Obamacare enforcer. You have to answer some questions about your health insurance and if you let it lapse for any period of time last year you can expect to be penalized. Also, this added burden on your tax person could make your bill go up.
- Download as much as possible. If you need to look at checkbooks and other bank records for income and expense information, probe your bank’s website for download links. I’m finding that every year they seem to improve your ability to retrieve transaction information via a spreadsheet file download. Banks used to be pretty stingy about the number of months you could go back. They are improving these services.
- Scan your digital calendar or appointment software. There is nothing worse than finding you have left out a deduction after you think your work is done. Look through the entries in your electronic calendar for 2014 and make sure you’re accounting for all your mileage and other travel related expenses.
- Download a checklist. There are so many categories of deductions that you really need a gentle reminder each year to be sure you aren’t missing something. Your tax preparer may have given you a checklist, but if not, there are others available on the Internet. Here’s one from the TurboTax people, but it doesn’t cover all the specific categories of deductions that apply to your business. However, otherwise it’s very good.
- Put tax preparation on your schedule. Getting organized in order to file taxes is like pulling off a Band-Aid – the quicker you get it done, the less painful it is. Get down to business as soon as you can and then you can move on to other, more productive, projects.
I know that many of you have this well organized and totally under control. That’s fantastic. Keep up the good work. If that’s not your situation yet, get the software and systems in place that dramatically reduce this yearly hassle.
