I have a love and hate relationship with taxes. Every tax season brings up mixed emotions. Although taxes aren’t on anyone’s fun to-do list, they are a necessary part of achieving financial freedom. Scratch that. They’re just a necessary part of being an adult, period. I know a lot of people like owing money instead of getting money back because they don’t want to lend the government a tax free loan, but I like to think of tax season as a way to access my money that I have been saving all year long. I know its wrong, but it works for me. My taxes come and go directly towards my loans. I don’t see them so I don’t think about spending them. Next year will be my first year without having any school credits to use and let me tell you that I’m not looking forward to the mess, especially since I have a side business and make an income with this blog. However, they go by a lot faster if you’re prepared for tax season ahead of time, and you’ll eliminate a lot of the frustration and last minute guess work, too.
Here are a few tips to get you ready for tax time:
- Set up all your business related expenses in a separate file. If you have a small business, then you will need to make sure that all of your business-related documents are separate from your personal expenses. In order to keep expenses as separate as possible, it’s always a good idea to have two different bank accounts, as well – one personal, and one for business. This will make it a lot easier to file taxes, and if you plan on having someone else do them for you, then your accountant will thank you!
- Put together a list of loans, investments and other borrowed expenses. Not all loans are created equal; however, some of them actually work in your favor when tax time rolls around. Make sure you take the time to write up a list of all the loans that you took out that were used for investment or educational purposes.
- Organize your receipts and other necessary documentation ahead of time for tax write offs. Even though you may never have to show anyone your receipts, you should always keep them on file just in case you receive a tax audit. Scrambling at the last minute to find all the receipts isn’t fun, and it causes unnecessary stress that can be completely avoided. Additionally, it makes figuring out what which write offs you qualify for a lot easier, as well.
- Find a tax professional that you trust. Although it’s possible to fill out tax forms without an accountant, it’s always a good idea to at least run your forms past someone who is familiar with tax laws before you turn them in. It’s important to remember not to fall for the first cheap tax advisor that comes your way; despite the fact that you may be saving a few bucks upfront, in the long run, you’ll thank yourself for shopping around a little bit. If you make sure that all of your paperwork is neatly organized, you won’t have to pay as much for a consultation, either.
- Look into incorporating your small business. In addition to helping you fill out your forms properly, an experienced accountant can also explain how to Inc. a business, and if it would benefit your situation. I have this and I can’t even begin to describe how fantastic it is. Yakezie
- Keep all important documents in one easy to find spot after you sort them. Although this may seem self explanatory, you’ll thank yourself for keeping all of your tax documents in one place – especially if you’re doing the last minute tax time scramble. This includes finding and organizing all of your employment stubs, mileage logs, and major purchases – if applicable.
If you weren’t ready for filling out tax paper work this year, then you still have time to make sure that next year’s tax season goes much smoother. Make sure you take note of what could have been easier this year, and always remember to file receipts away as soon as you get them. In fact, you may want to consider investing in an electronic receipt scanner and file system so that you don’t have to keep track of stacks of paper. This is what I use and it honestly saves my life and stops me from going super crazy in March.
Don’t forget – the easiest time to get ready for tax time is well before the forms are due.