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No matter how simple or complicated your finances are, doing your taxes always involves some level of hassle. At the minimum, you have to compile your tax documents and complete your returns by April 15 (unless you file an extension).
But if your taxes make you pull your hair out in frustration every year, it may be time to update your process and make some improvements. Here are five tips that will make doing your taxes less painful.
If you procrastinate on doing your taxes until April, you’re putting needless pressure on yourself to finish your tax returns at the last minute. Starting your tax returns early gives you additional time to figure things out and even reduces your vulnerability to tax identity theft.
“Waiting until the last minute just makes things all the more stressful and also opens you up to risks of making careless mistakes,”said Josh Zimmelman, owner of Westwood Tax & Consulting.
Before you start working on your tax returns, take the time to get organized. Compile all the documents you need — including W-2s, 1099s, receipts for itemized deductions and any other necessary paperwork. You’ll be in a better position to do your taxes when all your documents are accounted for — here’s a list of 10 forms people often forget to fill out.
To prepare, Zimmelman recommended compiling receipts, tallying expenses and dusting off last year’s tax return for reference before your 1099s and W2s arrive.
Tax credits and deductions are available for a wide range of reasons. Before you do your taxes, make sure you’re aware of all the credits and deductions you can use, as they may reduce your tax liability.
Some deductions are available for small business owners, college students, freelancers and working parents, said Zimmelman.
If you find the act of preparing your tax returns particularly difficult, hiring an experienced tax professional may be worth the cost. Make sure to shop around for the right person - compare tax pros and rates and make sure to check credentials. Zimmelman recommends making your appointment early so the tax preparer has plenty of availability.
“If you did your own taxes last year and it was a nightmare, then it’s time to graduate to hiring a professional to do it for you,” he said. “If you bring your last year’s return to your new accountant, they’ll be able to advise you on what you might have done wrong (such as missed deductions) and possibly save you some money the next time around.”
Here’s an how-to on finding the right tax-preparer.
If doing your taxes is consistently painful year after year, it’s probably time to ask yourself how you can better prepare for next year. This may involve creating a filing system for all your tax-related documents, investing more of your income in a tax-advantaged retirement account or seeking other opportunities to reduce your taxable income.
If you typically owe the IRS or the state, you may even want to reduce the amount of allowances you claim on your W-4 or save more throughout the year so you’re prepared to pay.
To get you started, here’s a list of all the important money dates in 2019.
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