Updated: Mar 1
This may be the way you view tax-related things. The scary IRS stories along with the fear of going to "The Big House" due to non payment of taxes is enough to drive anyone insane. I don't blame you! Let's face it, we have had some good examples of what "Tax Evasion" looks like..ah um..Wesley Snipes, Nicholas Cage, The Girls Gone Wild Founder Joe Francis, and one of my favorite artists the soulful Lauryn Hill. Before I became so enthralled with tax law I wondered how in the world did it go that far? To be frank with you I still wonder the same thing. I conclude that those individuals are self-employed like some of you. They get paid via F-1099-MISC and either didn't file their tax returns and the IRS filed it for them or when they filed their returns they simply didn't pay their taxes.
The anxiety associated with preparing for tax season can be off the charts for those that own property, donate large amounts to charity, worked more than five jobs during the tax year, have paid a ton in medical or dental bills, maybe had or lost family members, gotten divorced and the list goes on and on. All of these life events and changes in finances and tax law may impact what you can and cannot do at tax time. This would explain why some people wait until April 15th (the tax deadline) to file their taxes. It feels easier to ignore all of the tasks around preparing for your tax appointment until right before the deadline. Good old "procrastination" at its best.
As a tip, you can alleviate 90% of the tax preparation stress by doing these five things...
If you have worked for multiple employers and are afraid you won't know what's missing when the W-2's start rolling in; make a list of the places you've worked throughout the year. For the techies you can utilize the "Notes" feature on your cell phone and erase them as they come in or for the pen and paper lovers you can purchase a tax "notebook" and write them out.
Be sure that you have access to your prior year's tax return. If you have a new Tax Accountant or Tax Preparer it is a good idea to have it available for them to review. The prior tax return will help them understand your tax situation and maybe even jog your memory about some events you may have missed the last year. Also, it is good to have in the event you may want to know what has changed if your bottom line looks differently.
Ensure your Estimated Tax payments are made. This won't apply to most people, but for those who are self-employed or simply did not have enough taxes taken out you can make your tax payments in advance. In order to avoid the "failure to make estimated tax payments penalty", per the IRS the payments must be paid on the following dates: April 15th, June 15th, September 15th and Jan 15th.
Collect your receipts or bank statements and add up any business expenses (if applicable). This can be overwhelming if you wait to do it all at once. It can also cost extra to have your Tax Accountant or Tax Preparer do it for you.
Gather your receipts, bank statements or medical office print outs and add up the qualifying medical and/or dental expenses if you plan to itemize your deductions. Remember, in order for itemizing deductions to work in your benefit the total amount MUST be more than the IRS given Standard Deduction based on your filing status.
Getting those things out of the way will get you off to a good start. I also have an Individual AND Business Tax Checklist available under the "Resources/Updates" tab to assist you. Employers and financial institutions have until Jan 31st to get your income and tax documents mailed or electronically sent out to you. Some may arrive early. Be sure you have ALL of your documents available before setting your tax appointment. Failure to leave off income can result in under reporting issues with the IRS.
That is all for now folx! Happy Filing!!