4 Tips that May Help Make Filing Taxes Less Agonizing
The US tax system is notorious for its complexity. This is why filing taxes might easily rank among some of the most annoying things US citizens have to go through every year.
Many people delay filing taxes because of this inherent difficulty. And that does not make the process any easier.
While you can do absolutely nothing to change how the tax system works, you can try and make the filing process a tad less annoying for yourself.
In this article, we are sharing some practical tips that may make tax filing a bit easier for you.
Be sure to read till the end and leave with all the tips that can potentially make you dread tax season a little less.
Helpful Tips that may Make Tax Filing Less Dreadful
An average individual spends 12 hours working on their taxes . This indicates how difficult the filing process can be and justifies why people dread it so much that they try to delay it as much as they can.
So, let’s try to nip the issue in the bud and address the complexity with tax professional-approved tips that may make filing taxes a bit easier for you next time:
One of the biggest reasons people find taxes so complicated is because of all the paperwork involved in the process.
There are forms upon forms that you need to receive and, more importantly, remember where you have kept them as the tax date rolls in.
It might help if you organize all the documents as you receive them so that you don’t have to scurry around frantically looking for your documents as the deadline gets closer.
Try and dedicate a space for all your tax documents. This could be a drawer, a basket, a cabinet in your kitchen, or a safe folder on your hard drive.
You should receive a W-2 form from your employer if you are employed. However, if you are self-employed or an independent contractor, you should receive form 1099 from each payer that you received a payment from.
The due date for these forms to arrive is usually January 31st .
Make sure you have collected all the expected documents by the due date and have put them safely in the dedicated tax documents’ space.
Of course, the documents we have discussed here are not the only ones you need to file your taxes.
It would’ve been a dream if they were.
Depending on your financial situation, you may need more forms .
So cross-check the availability of all the documents needed and keep them on hand for a potentially easier tax season.
Filing taxes may become significantly easier if you know all documents you need are stored safely somewhere.
Knowing you don’t have to go on a scavenger hunt of documents might even motivate you to get done with the job sooner.
Oh, and don’t throw these papers away once you have successfully filed your taxes. The experts recommend keeping your tax documents safely for at least three years and sometimes even longer .
Decide Between Standardized or Itemized Deductions
Tax deductions lower your taxable income, which ultimately lowers your tax bills. And once your tax bill is lowered, you have to pay less in taxes to the government.
There are two types of deductions you can take, standardized and itemized.
A standardized deduction is a fixed amount set by the government depending on your financial situation that you can deduct from your taxable income.
Itemized deduction, on the other hand, builds on all the qualified expenses you make against your income.
Choosing between standardized and itemized deductions can be pretty easy for people who don’t have many qualified expenses they could claim against their taxable income.
But for others, this could potentially mean a difference of hundreds of dollars.
Therefore, try and determine which value is greater for you, the standardized deduction or the itemized one, and then choose accordingly.
Both types of deductions have their pros and cons.
Standardized deductions are simpler but maybe less than itemized deductions if you have a lot of qualified expenses.
On the other hand, itemized deductions are incredibly complicated and make the tax filing process all the more difficult. Additionally, if you don’t have that many qualified expenses, itemizing might not be worth the hassle.
If you are struggling in choosing the best option for yourself, consider working with a tax professional.
Tax professionals might be able to help you determine which tax deduction route leads to more significant tax savings so you can pick one that benefits you the most.
Save Your Receipts
If you have chosen to itemize your expenses, you will have to start collecting the receipts for all the expenses you plan to claim against your taxable income.
When you itemize your expenses, you have to remember all the qualified expenses you made the entire year for the effort to be worth it.
Therefore, it is a good practice to save your receipts.
So, keeping your receipts safe might need a focused action plan.
The most convenient method here is to keep a box for receipts at your home, office, and in your car. Label each receipt you receive by the category of expense it belongs to and put it in the box nearest to you as soon as you can.
In this way, you will have all the receipts neatly (or not so neatly) stored away, ready to help you when you sit down to file your taxes.
Additionally, it might help if you know what expenses are eligible for tax deductions so you can discard useless receipts.
While the TCJA of 2017 eliminated all the unreimbursed work expenses for full-time employees, you may still be able to claim medical expenses when itemizing your deductions .
Self-employed individuals and independent contractors might have more qualified expenses they could claim , and hence a bigger responsibility of tracking and storing their receipts.
Consider researching online or working with a tax professional to determine the expenses that qualify to be claimed against your taxable income.
Again, as with your tax documents, don’t throw your receipts once you are done with your taxes. IRS may, in certain cases, come knocking at your door years after you have filed your taxes for a tax audit.
Having the receipts of expenses you claimed in your tax deductions on hand might help if this happens.
So, keep your receipt safe for at least three to seven years .
If you are worried about the ink on your receipt fading, you can scan and store them digitally in a safe location and preferably make three backups, just in case something happens to your hard drive.
File Your Taxes Early
33% of Americans are guilty of procrastinating and filing their taxes last minute .
But we don’t blame or judge anyone. It is human nature to avoid anything as agonizing as taxes appear to be until we absolutely have to do it.
But tackling these seemingly distressful things headfirst and getting them over with is often better than delaying them until the last minute.
Compare it with pulling a band-aid, if you may.
So, try to file them as soon as you can, without waiting for the last-minute pressure to motivate you.
Filing early has multiple benefits.
First and foremost, you will get rid of the unnecessary tax stress that builds up as the tax deadline gets closer.
Additionally, early filers are more likely to avoid tax fraud due to identity thefts .
Work with a Professional
Filing taxes can be overwhelming, especially for new filers and people with a complicated tax situation.
Consider talking to a tax professional instead of letting unnecessary tax stress consume you as the tax deadline gets closer.
A tax professional can help you choose the right path for claiming your tax deductions, potentially helping you save on taxes. Additionally, a trusted and dedicated professional might also be able to help you file your taxes with less stress, hassle, and frustration.
But if you plan on hiring a tax professional, you may want to act quickly as most tax professionals stop taking new appointments as the tax deadline gets closer.
Remember, the deadline for this year is April 18th, 2022. So, if you want to work with a tax professional, the time to act may be right now.
Financial Planning Beyond Tax Season
Are you considering investing a tax refund or interested in learning how you can begin creating a financial plan tailored to your needs? Talk to our financial professionals to get customized financial strategies and assistance on wealth management, investment, and building alternate income streams.
This information has been obtained from outside sources and is provided for general informational purposes only. Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor. Equitable Advisors, its affiliates and financial professionals do not provide tax and/or legal advice.
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