The tax season can be a headache to anyone who didn’t prepare for it earlier. Filing of tax returns and complying with other tax related obligations are detested by many people because they get caught up complying last minute. That is majorly associated with not preparing adequately prior to the deadline of filing returns. The end of tax season does not justify you to sit back and relax for the next 11 months While relaxing might seem appealing, you might save time and energy if you prepare early and stay ahead of your taxes. Here are a few ways to stay on top of your taxes all-year round.
If you start to organize your tax records early, you will have an easier time while filing returns during the next tax season. You can start now to compile your tax-deductible receipts such as medical bills as well as other work-related documents needed during filing of returns. You can leverage a good filing system to organize the documents. Organize your important tax documents together in one place to stay ahead of your taxman. Additionally, you will find last year’s tax return information helpful during the next tax filing season. Your previous tax return will also be important when the need for auditing arises.
- Withholdings review
You can also stay ahead by evaluating the amount of money withheld for tax purposes on a monthly basis. A huge refund can mean that the taxman is taking too much from your paycheck and you could perform some adjustments to ease your wallet. Alternatively, you can allow more money to be taken out of your paycheck to ease your tax obligation next year provided you paid a big sum of money to the IRS. Additionally, you will want to establish how some of the significant changes to your tax status could affect your next tax bill. The significant changes in tax status could include baby, new job, marriage and the like.
If you’re feeling philanthropic and you want to contribute to charity, it helps to start thinking early how much you will contribute. It also applies to any other deduction you’re thinking about. You can take advantage of those opportunities to maximize your deductions during the next financial season. You should strive to keep relevant receipts and plan out early on your next tax returns to save both time and money when the time comes.
- Determine if you need the help of a tax firm
Partnering with a firm is called for when your taxes get complicated and when you’re running into an increasing audit risk. When the circumstances call, don’t waste your efforts and time on your tax returns. You should be thinking about getting a tax firm now and a little bit of research as well as due diligence will go a long way into finding a trustworthy tax firm that will satisfy all of your tax needs.
- How are you filling your returns?
If you have been filing your returns using any way other than electronically, it is time you start thinking about going digital with your taxes. Filing your tax returns electronically comes with many advantages. It will be easier for you to track the progress of your refund and get it sooner.
- Digitize your records
If you decide to go digital, go all-in and start digitizing your tax records. It is easier to manage and organize soft-copies of documents compared to their hard-copy counterparts. You can start by taking a picture of your receipts and scanning documents into pdf. All of your contracts, signed statements as well as other important documents should be in PDF format or any other equivalent format. Archive your business email, as well as your bank credit card statements. You can keep these records safely in the cloud. That way, you can track what happened and when it happened easily. Additionally, if IRS decides to audit you, they can do so for up to six years ago without much effort. With the unlimited storage as well as minimum costs of the cloud storage, you can easily store your records for many years and whenever needed, you can pull out years of records conveniently.
- Use percentages rather than totals when budgeting
Self-employed individuals often have multiple income streams at different rates. If you’re self-employed, chances are, you have various statements of work that you did with various clients during different time periods as well as rates. It becomes difficult and confusing to predict your annual income accurately. Working with percentages will make your work relatively easier. You could also consider working out your annual projected income at the beginning of the year and save your taxes for that. Otherwise, budget throughout the year using percentages to be able to control your savings better. That way, you will raise enough money to meet your tax obligation during the next tax season.
- Try to avoid cash
Avoiding cash is another way to make digitization of your records easier. When you use cash, it will be difficult for you to track, to prove and difficult to work with during tax preparation. You will want to avoid it as much as possible. In any case, most businesses accept digital payments. It will boost your efforts to digitize your records significantly as you will only have digital information.
While sitting back after filing this year’s tax returns might seem exciting, it wouldn’t be a prudent idea to relax now and have the worst day of your life during the next tax season. It is not difficult to keep up with your taxes all-year round. The way that has been found efficient in streamlining tax filing endeavors is digitization. If you carry out your financial activities digitally and organize the records digitally, your work will be much easier when filing your returns. You can also log on anything necessary for your self-assessment on the go using a mobile application. With the above ways, hope you will have an easier time filing your returns during the next tax season.