According to the latest reports from the financial sector, more than 140 million American citizens await tax season each year. Some do so with anticipation while others veer more toward anxiety or outright fear. Either way, the time to file taxes inevitably makes its annual April arrival. Despite its recurring nature, quite a few Americans are ultimately caught off guard as the deadline draws near each year. It’s best to avoid that if at all possible. Being prepared in advance of the deadline can help you avoid unnecessary delays and all the hassles and possible penalties that come with them.
Find the Right Professional to Work With
Millions of people are choosing to do their own taxes via software and online resources these days. Though it works well for many, some run into numerous problems. Self-preparation options offer several customization options and cater to the unique needs of many taxpayers, but they’re not the best solution for everyone – especially if you are considering Roth conversions to take advantage of today’s low tax rates. In many cases, people can benefit more from working with a team of retirement and tax professionals like those at Walker Capital Preservation Group and their affiliates. Professional tax and retirement planning experts offer a range of advantages and tailor their services to individuals’ needs.
Make Sure Your Information Is Accurate
Many of the changes that take place in people’s lives can affect the withholding taxes they need to have taken out of their incomes. Some developments require more withholding taxes whereas others necessitate less. As the network of professionals associated with WCPG can tell you, not having enough money taken out of your income gives you more to work with throughout the year but can leave you paying taxes in April. On the other hand, having more money withheld for taxes than is necessary detracts from your income but can generate a sizable refund at the end of the year. Significant errors in either direction can cause major problems.
Get Your Paperwork in Order
In addition to finding a professional to work with, it’s important to have all the necessary tax documents in order. These include W-2 and 1099 forms for earned income as well as documents that detail any lottery winnings, stock sales, unemployment benefits, and other unearned income such as a pension or proceeds from rental properties. Those are only a few of the documents you may need to get your taxes filled out properly. Nothing delays the tax filing process quite like not having all the right paperwork on hand at the right time.
Know Your Deductions
Deductions can make a major difference when tax time rolls around. They often mean the difference between getting a refund and having to pay in significant amounts of money. Understanding which deductions you’re entitled to will certainly work out in your favor. At the same time, having information on hand to back up those deductions will make for a seamless tax preparation experience.
Be Prepared to Pay
Tax time is an annual blessing for those who typically receive refunds. Of course, it’s quite the opposite for those who end up having to pay. If possible, it’s best to set aside a little extra money each month in case you have to send the IRS a payment instead of receiving a refund from them, according to CPA David Baldwin. Otherwise, you might end up facing financial hardships down the road.
In a Nutshell
Tax time is inevitable. Somehow, it seems to work out better for some people than others. Being prepared in advance can help turn the tables in your favor. This entails having all your paperwork, deductions, and other documentation on hand, working with a professional who can help ensure everything is in order, and having a little financial cushion in place in case you have to pay in at the end of the year.