It’s the time of year when tax filing is on most people’s minds. Maybe you’re relieved to have filed early and to have already put your refund to good use. Maybe you’re currently up to your eyeballs in tax forms, hoping for the best. Or maybe you’re imagining all the cool things you could do with some extra cash as you eagerly await your refund.
Wherever you are in the process, you’re probably in an especially good position to appreciate how preparation – or the lack of it – can make a huge difference in whether filing your taxes is a piece of cake or a giant headache.
If this year has been a headache for you, here are some ways you can prepare to make next year’s experience a whole lot easier on you:
Whether most of your documents are still on paper (and still arriving the old fashioned way – via your mail carrier) or whether you’ve managed to go the paperless billing route and have converted past paper files to electronic files, you need dedicated folders in which to organize different documents as they arrive.
Specifically, you need to save and file:
If you’re like many people and you tend to misplace or lose paper receipts, download a mobile app to scan them and send them to yourself. If you happen to use Outlook or Gmail, you can even play with the settings so that any email containing the words “2018 Tax Documents” will go directly into the folder of the same name.
Learn from last year’s tax experience
If your latest tax return is successfully completed, use it to inform your decisions for filing next year. For example, if you under-withheld taxes this year and now unexpectedly owe the IRS, make sure you make the necessary adjustments this time around to prevent that from happening again.
On the other hand, if you’re receiving a large refund, you’ll want to decrease your exemptions. While big refunds can be exciting, ideally, you want to find the sweet spot of just breaking even with the IRS (unless you’re interested in giving the U.S. Government an interest free loan, which is exactly what has happened when you find yourself with a large tax refund.)
Ideally, the money that was an interest-free loan to the U.S. government should be working for you, which is to say it should be in an interest-generating savings account or other investment vehicle that will earn you money.
If you feel confused about the ideal amount to withhold, you can use the IRS Withholding Calculator (yes, they have that) to plan for next year. Have your most recent pay stub and income tax return on hand. Once you’ve determined what adjustments to make, be sure to communicate this with your company’s HR staff so the changes are put into place.
Keep your eye on the ball of the future
Do you anticipate life changes in the coming year? If so, they’ll affect your filing status.
By keeping these things in mind and staying on top of changes that may affect your deductions, come next year, tax time won’t have to be a headache. And filing with E-file can make it even easier. In fact, it might even be a cakewalk.