Tax Preparation – Make It a Priority
Even mentioning taxes can cause us to grind our teeth. Preparing our personal income taxes brings up thoughts of organizing several different types of documents, spending hours filling out forms, and the dual bad feelings of ‘I sure hope I didn’t over pay’ and ‘I sure hope I included everything so I don’t get audited’. And Heaven help us if we have something unique occur within the tax year making the process even more complex, like a significant capital gain or an inheritance.
Since 2001 there have been 4,680 changes to the tax code, about one a day. To try to convince someone completing your taxes can be made ‘easy’ goes beyond an exaggeration to an out and out ‘lie’. This said, some tax preparation steps can make the task easier to manage.
- Make a checklist: Write down a laundry list of documents you will need and in many cases you expect to receive in the mail, including; W2 income statements, dividend statements, mortgage interest paid, taxable interest earned from investments, and statements of donations given. This laundry list can be used as both a collection tool to ensure all documents are received and also in organizing your statements based on category.
- Read on new laws that may affect your filing: In today’s world many helpful summaries of tax code changes can be found on the internet, but http://www.irs.gov/ still would be the first place to start the search on any changes within the past year.
- Complete Your Tax Forms Early: Procrastinating on completing income taxes is very easy to do…after all we have until April 15th. Procrastinating though may not only lead to errors, but just as importantly one might not take full advantage of tax benefits afforded to them if they are slamming through the numbers at the last minute. Target to complete your taxes by mid February, giving yourself plenty of time to review and change over the next 1-2 month period.
- Research Using a CPA (Certified Public Accountant): Many of us take pride in being able to complete our own taxes, but keep in mind only a small percentage of our elected representatives who develop the tax laws can complete their personal taxes correctly. The average cost of using a CPA is around $250 to complete your personal taxes. It might be worth paying this amount for a CPA’s time and expertise, and to walk with you if an audit were to occur.
While completing your personal income taxes is not easy or fun, take the attitude it is a challenge you are going to meet head on. Take control!