This blog entry was written in collaboration with Alfred Katzin, CPA and is intended for informational and organizational purposes only. It is not intended to be used as tax advice.
Good organization may not cut your taxes, but it will cut down on your stress at tax time and may even result in financial rewards. To ensure that your taxes are ready to be filed on April 15th, consider these tips for tax time organizing.
Step One: Organize Your Records
For many, the biggest hassle at tax time is compiling all of the necessary documentation. This includes last year’s tax return, this year’s W-2s and 1099s, receipts and so on.
You may want to consider using a personal finance software program throughout the year, so you have easy access to all relevant information at tax time.
How do you get started? Decide if you are going to use a professional tax return preparer or if you want to prepare your own return using one of the readily available tax return programs or using the IRS web site IRS.gov. In any event, the following steps will be helpful.
Step Two: File Your Taxes
You can file your tax return on paper or with an electronic filing. Electronic filing works best if you expect a tax refund. Because the IRS processes electronic returns faster than paper ones, you can expect to get your refund three to six weeks earlier. If you have all your documents in order, you can file electronically in January. If you have your refund deposited directly into your bank account, the waiting time is cut down more.
There are other advantages to e-filing besides a quick refund. The IRS checks your return to make sure that it is complete, which increases your chances of filing an accurate return. Less than one percent of electronic returns have errors, compared with 20 percent of paper returns. The IRS also acknowledges that it received your return, a courtesy you don’t get even if you send your paper return by certified mail. That helps you protect yourself from the interest and penalties that accrue if your paper return gets lost.
If you owe money, you can file electronically and then wait until the federal tax filing deadline to send in a check along with Form 1040-V. You may be able to pay with a credit card or through a direct debit.
Step Three: Protect Yourself if You Can’t File on Time