Tax time! Are we having fun yet? I’m teasing, of course… Even I don’t like filing taxes and I’m a financial planner. Nothing can eliminate completely the stress most taxpayers feel when dealing with the IRS. However, there are plenty of ways you can make tax time easier on yourself. Some good news: the filing deadline for 2015 returns is April 18, 2016, instead of the usual April 15. Because of Patriots’ Day, residents of Maine and Massachusetts will have until April 19 to file.
One of the best ways to deal with tax season is to start your preparations early. If you wait until the last minute to do your taxes, you will always feel stressed and might not have enough time to address questions that might arise. You’ll also have time to find a qualified tax preparer to help you with any complex filing issues. Most tax forms should have arrived in January. If you haven’t received an expected form, contact the issuer and ask for an update. Sometimes forms get lost in the mail, and you don’t want to be left scrambling at filing time. While you wait, use any pay stubs, receipts, account statements, or other backup documentation to run some preliminary numbers.
Designate a Safe Storage Space
Even if you get most of your tax documents electronically, chances are a few paper forms will be arriving in the mail. Whether you use something as simple as a large envelope or as elaborate as a filing cabinet, having a designated space for your tax documents is important. You will also want to store those documents after filing your taxes―the IRS recommends keeping records on file for three to seven years.
Scan Your Documents
Having your paper-based tax documents stored safely is important, but it is a good idea to have an electronic backup as well. Scanning your documents as you go is the best way to proceed, and it takes only a couple of seconds. If you don’t have a scanner at home, consider purchasing a low-cost model. It might not be a good idea to use a workplace or public scanner because of the potential for identity theft. At home, set aside a folder on your hard drive (or online storage account) to hold your scanned documents, and then store the physical copies in the spot you designated earlier. When it’s time to file, you will have all the information you need at your fingertips.
Filing online is one of the best ways to avoid mistakes and avoid mail-related tax fraud. Whether you buy tax-filing software or use the online equivalents, you can enter each tax document as it arrives and go back to the return to make changes. If you are due a refund, you can usually receive it faster if you choose direct deposit. If you owe money, consider paying right from your bank account instead of using a credit card. This will help you avoid potential fees and interest charges. Even the most elaborate preparation cannot make tax time fun, but these tips can make it less stressful. Bottom line: starting early, getting organized, and reaching out to a professional about complex issues can all help make tax time less taxing.
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John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.