Here we go gang! Do you feel you are ready to prepare for tax season? Are you ready for that dreadful time of the year? To many of you, the time spent putting an entire year’s worth of paperwork together is enough to cause you to request for a deferral. The biggest mistake in doing so is not putting in an estimated payment with your deferral request. You end up paying a hefty fee (also known as penalties and interests) for that blunder, in addition to opening yourself up to being audited. This year and moving forward, let us make sure to avoid these mistakes once and for all. By following a few basic procedures year-round and knowing how to prepare for tax season, April 1th doesn’t have to feel like a visit from the in-laws. Did I say something wrong? 😉
The key in managing your finances is pure organization. Though it may sound basic at first, the actual execution of this task is more daunting than you can imagine. So here are some pointers: 1) Create an organizational system for your files, papers and receipts long before tax time. 2) Irrespective of how simple or sophisticated that system my be, develop what I call the “envelope system”. Gather your receipts and numbers in tax-related categories, or dates. When the time comes, whether you prepare your own taxes or have your own CPA handle them, this organizational task along will either save you on time, or your CPA’s fee will decrease significantly for not having to clean up your “mess”. 3) Simplify your life one step further, and e-file your returns.
To those of you who are less tech-savvy, you might see it as a knock on the traditional mailing system. Actually, there is a little more to it than that, and the reasoning goes much deeper than simply achieving utmost efficiency. Now, we all know governmental employees are hard workers :O… Moving on, keep in mind that e-filing prevents IRS employees that task of having to re-enter your information onto their database. Thus, there is a lesser chance of mistakes and angry follow-up letters. Furthermore, as a consumer, an electronic transmission of your refund will enable you to get your monies back faster.
As to whether you should hire a professional or do your own taxes? Naturally, this is a personal choice and varies a great deal on your level of expertise and comfort level. My rule-of-thumb is, outside of being a W2, if you are a business owner dealing with 1099’s, investment properties, 1031 exchanges or the likes; I would simply recommend hiring a CPA. The money you spend with this expense could easily save you in the thousands when you hire someone competent.
Hopefully, you found this helpful. To those of you looking to get a Trust with us, we will throw in a complimentary binder that will help organize everything I have just discussed. You will realize how much easier handling your taxes will be from this point forward. Until next time, have an amazing week!