April 15th is fastly approaching. Many of you have already filed because you are getting a refund, but many of you haven’t knowing you may owe in the end. But you have nothing to worry about. Here are some tips on how to have a successful tax season and beyond.
- Only pay what you owe – your goal every year needs to be to break even with your taxes. This is what the withholding calculator on the IRS website is for. Owing the IRS is not convenient and giving them too much every month resulting in a large refund is taking away money you need. Using the withholding calculator will get you very close and keep things easy and stress free. Make sure to use the calculator in Feb and again in Sept to keep yourself on track.
- Receipts, receipts, receipts – Make sure you do not take any deductions that you cannot back up with a receipt. And keep those receipts with your copy of your return for 7 years. The 2 main reasons for an audit are random screening and red flags. Either way, receipts will make this process simple should it ever occur.
- Use a professional when necessary – if you have a lot of deductions or sources of income, are self-employed, basically anything other than a simple return, hire a professional. It will be worth every penny to make sure you take all allowable deductions and to make sure your return is accurate.
- Owe money – don’t panic – if you owe this year don’t panic. You can set up an installment agreement if you do not have the cash on hand. You will want to pay it off as soon as possible and use the withholding calculator to fix the issue going forward. But not filing because you owe is a serious mistake. One reason is it is against the law. Another reason is there is an additional penalty for not filing on top of everything else. It is not worth it and not necessary.
Most people hate taxes and tax season. But there is no need. Taxes are part of life. How you handle them will determine how stressful they are to you. My final advise – file you taxes whether you owe or not. If you do, set up an installment agreement and pay as soon as possible. Use the withholding calculator to fix the future and move on with your life. If you set things up right, April 15th is just another day.