Personal Financial Organization Tips to Make Tax Season a Breeze
Is there anything more universally detested than tax season? We all have to do it, yet we procrastinate and pretend it isn’t coming. Unfortunately, ignorance is not bliss in this situation.
If you want tax season to become just another annual event and not something you dread it all starts being organized. So, let’s explore a few helpful tips for organizing your personal finances ahead of tax season for less stress.
Understand Your Tax Requirements
For starters, you need to know what taxes you’re responsible for. If you get an allowance, work a part-time job, or even make money from a hobby, you might need to file taxes. The rules can be a bit tricky, so it’s a good idea to do your research and speak with a tax professional ahead of time to make sure you’re aware of what you’re responsible for during the course of any given year.
Keep Good Records
There’s nothing worse than digging through a year’s worth of receipts and documents at tax time. Make things easy on yourself by keeping track of important papers and receipts throughout the year.
Set up a simple digital filing system with folders or a shoebox to keep everything in one place. This could include pay stubs from your job, receipts for things you might be able to deduct (like charity donations or work-related expenses), and any tax forms you get in the mail.
If you have any side businesses or income-generating investments with expenses associated, you’ll want to have a specific system for organizing each one of these. Take a rental property as an example. Either you need to organize this yourself, or you need to hire a property manager to do it for you.
For example, Crown Luxury Property Management puts together an annual report for each property their clients own. “The annual report clearly summarizes expenses and incomes by category, enabling property owners or their accountants to easily determine the types and costs of all financial activity from the previous year. Both the monthly and annual reports are available online for client review.” This is the kind of detail you want available to you.
Save for Taxes All Year Round
If you have a 1099 job where taxes aren’t taken out of your paycheck, you might be in for a surprise come tax time. To avoid this, try to put a little bit of money aside each time you get paid. Think of it like a savings account just for taxes. That way, when tax season rolls around, you’ll have the money you need ready to go.
And it should also be noted that, if this is not your first year earning 1099 income from a job, you’ll need to start paying quarterly estimated taxes to the IRS. Some people see this as an annoyance, but it’s honestly better than getting to April and realizing you owe thousands of dollars.
Learn About Deductions and Credits
Deductions and credits are the secret weapons of tax season. They can lower how much tax you owe and sometimes even increase your refund. Deductions might include things like money you’ve donated to charity or costs related to a job you have.
Credits are even better because they reduce your taxes dollar for dollar. There are credits for all sorts of things, like education costs, children, or even just for earning a certain amount of money. It’s worth doing a little research or asking someone who knows about taxes to help you figure out what you might be eligible for.
Use Online Resources and Tools
The internet is full of tools and resources that can make tax time easier. There are websites that can help you understand tax rules and even software that can walk you through filing your taxes step by step. Some of these tools are free, and they can be a big help in making sure you’re doing everything right and getting all the money you’re entitled to.
Make Tax Season a Breeze
Staying ahead of tax season is all about being prepared. The more you put systems in place ahead of time to stay organized, the easier things will be come March and April. Hopefully, this article has given you a few ideas to think proactively about your taxes this year.