With tax season just around the corner, I have a few organization tips to create ease with filing taxes, and to contribute to your financial wellness!
With a little planning filing your taxes can be easy and a lot less painful!
I’m not a tax advisor. As the daughter of a CPA, I understand well the long hours required during tax season to meet the April 15th deadline for a tax preparer. I realize, too, that there are always a handful of folks who extend their tax filing by six months.
It was never clear to me why people would file an extension considering the fact that taxes are always due in April. Now, of course, I get it. It can be a painful process.
If you are disorganized and do not know where to find the information you need to get taxes filed can make it an extremely difficult task. When it becomes necessary to take time out of your already over-extended, busy life for such an unpleasant task why not delay, delay, delay?
FOR ME, TAX FILING IS EASY
My dad still helps with my tax return, but I always get it filed on time. Early in fact, because I usually get a refund. The secret?
An ounce of prevention is worth a pound of cure- Ben Frankin
Top Tax Organization Tips to Start Now and Create Ease for Next Year:
1. HAVE AN ORGANIZATION SYSTEM
Organization is one of my zones of genius. It wasn’t until recent reflection that I realized, part of my ‘secret’ to success is organization. Not just in one area of my life, but many. Since organization comes naturally, it carries over into my physical space, my calendar, meal planning and more which of course, included my finances.
Your organization system doesn’t have to be fancy. Think manila folder that you put in a designated drawer or space labeled ‘Taxes’. Then every time you come across a document that you know is used for tax purposes, just file it in the folder.
2. DEDICATE TIME EACH QUARTER
If you are a business owner with pass-through income (LLC, sole proprietor) that gets included on your personal income tax return mark a day on your calendar quarterly to catch up on your records. I cannot emphasize the importance of this enough, whether you are paying a bookkeeper or tax preparer to do this for you or not.
You will be amazed at the amount of time it takes to input mileage, ensure all business receipts are accounted for and get your books reconciled. Keep up with this on a quarterly basis and you will find it tremendously helpful and will take less time. If you hire someone to help with your books the information still needs to be in order! They can’t do their job without it.
3. INVEST IN THE ADVICE OF A QUALIFIED TAX PREPARER OR DIY WITH QUICKBOOKS SELF-EMPLOYED
Unless you are an accounting major, why try to do this yourself? Have you ever seen the tax code, nonetheless read it?! It’s worth every penny to have an expert file for you, deal with the IRS and figure out all of the deductions you qualify for. Just do them a favor and have all of your stuff in order, OK? If they ask questions, it’s for a reason. They need this information. The quicker you get it to them, the faster and easier the filing will go.
I use and can recommend Quickbooks Self-Employed. It’s affordable software, easy to use, and a great way to keep your small business or side gig income and expenses in order.
4. SET ASIDE MONEY FOR YOUR TAX OBLIGATION
If you are self-employed, including a side gig, especially new to entrepreneurship, don’t forget to set aside money into a savings account to pay for taxes. Tax charts are readily available with the income tax rates each year. 25-30% of your gross receipts is a good place to start. Each month ensure these funds are being swept (automatically transferred) or set aside manually, to avoid any nasty surprises. Getting into the habit of setting the money aside before you spend it will help keep you from owing more than you have on hand by the end of the year.
Final tip, making an estimated tax payment quarterly (if you are self-employed) will make paying at the end of the year even easier.
Need more help? Connect with me here.
Michelle Boss is a Personal Finance Coach and Certified Financial Education Instructor. She is certified through the NFEC. As a Professional Money Coach, Michelle helps successful women get smart with money so they can grow their wealth and finally feel financially secure. With Michelle’s Group and One-to-one Coaching Sessions, she helps take the Fear out of Finances.