Is there a way to make tax preparation easier? Americans hate filing their taxes so much that 28 percent of them would rather go without their cellphone for a week than complete the annual task, according to one survey. Another 27 percent say it would be easier to locate all of the constellations in the night sky.
Causing some of that anxiety, says the survey from tax preparation software provider TaxSlayer, is uncertainty. More than half of Americans said they aren’t confident in their ability to file taxes without help. In fact, nearly a third of respondents said they weren’t sure what tax terms, including “standard deduction,” “exemption,” “tax credit” and withholding,” even meant.
But every April doesn’t have to be a mad dash to find the forms and receipts and understand the required terms and documents needed to properly file those taxes.
Here are five things you can do this year to make tax preparation easier next year
Keep your records all in one place.
It can be a shoebox or a drawer or a plastic container under your bed. It could be an app where you electronically organize your charitable contributions, business-related receipts and other important documents. MoneyTalksNews.com lists smartphone apps that can help you store everything in one place.
Whatever your system is, make one and stick to it throughout the year so that everything you’ll need is in one place to make tax preparation easier next year. The Internal Revenue Service lists the documents that most people use to file their taxes.
Check in with your employer’s human resources department.
As you look towards the next tax year, sit down with your employer’s human resources department. Take a look at the contributions you’re making to your retirement savings plan. The Saver’s Credit lets taxpayers lower their federal income tax when they make eligible contributions to an IRA or employer-sponsored retirement plan. Are you taking full advantage of this credit?
Then, review your W-4 and check your tax withholdings. That’s the money that doesn’t end up in your paycheck every other week but is, instead, passed on to tax authorities at the local, state and federal levels. Maybe you got married or divorced, welcomed a new baby or got a part-time job. All kinds of life changes could impact how much — or how little — you must pay in taxes. Review your W-4 each year to ensure it’s up to date. Proactively assessing your deductions and withholdings can go a long way towards making tax preparation easier next year.
Make sure you understand tax terms.
Terms like withholdings. Or standard deductions. Or tax credit. Bankrate.com offers easy-to-understand definitions of the 10 most popular tax terms. Just a basic knowledge of these terms can help you make better decisions about your money, and make tax preparation easier.
Plan for estimated tax payments.
In most cases, your employer withholds money from your paycheck to send to tax authorities. But, if you are self-employed or you recently launched a side business where you earn money, there’s a chance you’ll need to pay estimated taxes every quarter so you aren’t faced with a massive tax bill next April. If you’re confused about estimated tax payments, the IRS answers frequently asked questions about paying estimated taxes on its website.
Consider hiring a tax preparer next year.
If you’re still stressed out after taxes, even after the work throughout the year to stay organized and up-to-speed, there’s no shame in working with a tax preparer to make tax preparation easier. Now, long before next year’s tax deadlines come up, is a great time to find the tax expert for you. The IRS shares 10 tips for picking a tax preparer. Services can get pricey, but not all of them are. In fact, the IRS and Free File Alliance offers free file software if your income is $66,000 or less.
Preparing now for next April, before you’re stressed out by deadlines and filing requirements, can save you plenty of grief and maybe a little money too.
Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today.