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’Tis the season – the tax season! How do you prepare for it? The most important aspects are organizing your tax paperwork and understanding your credits and deductions. Proper preparation saves you time and lets you remain stress-free. Here are some more ideas on how to get ready for the tax season. ~ Ed.
Tax season is upon us again. It feels like every year, it sneaks up unbidden, taking us by surprise. But if you’re doing tax season correctly, you should never be surprised because you stay prepared all year.
Here are the top five tips for staying on top of tax season.
5 Tips to Prepare for Tax Season
Do you have an IRA? Are your name and address updated? Here’s the short checklist and some answers that may help you make your preparation for the tax season smooth.
Hire a CPA
Before you figure out how you’ll file, where all your paperwork is, and whether or not you’ll need an extension, hire a CPA. Sure, CPAs, or certified public accountants, will cost you, but not as much as the IRS will gouge you if you file incorrectly.
CPAs like MI Tax CPA provide tax and CPA accounting services, including income taxes, IRS representation, consultations and planning, business CPA needs, bookkeeping services, and more. Why bother sorting it out yourself and risk filing incorrectly when you could work with a CPA to get it done fast and flaw-free?
Organize Your Tax Paperwork
As tax season approaches, the most important thing you can do is organize your tax paperwork. Keep them all in the same place as your W2s and 1099s start rolling in. Better yet, use a label maker to label your folders containing tax documents so they’re perfectly organized.
The penalties for misfiling taxes are steep. If you file incorrectly, you could face a five-year prison sentence and up to a $250,000 fee. So make sure you have all your paperwork in one place.
Understand Your Credits and Deductions
If you aren’t taking advantage of credits and deductions, you aren’t doing your taxes correctly. Sure, you can file your taxes and not use any credits or deductions — you won’t be penalized. But it would be a gross waste of money, given all you have to save by taking advantage of them.
Tax credits help reduce your business’s tax liability, and credits apply across all sorts of industries, from the materials you use to how you get yourself to work each day.
Make Sure Your Name and Address are Updated
Don’t overlook this one. It’s easy to forget to update your information with the IRS and Social Security Administration if you’ve moved or changed your name. Contact your local Social Security Office to report these changes. Tax season will go much more smoothly for you.
Max Out Your IRA Contributions
If you have an IRA, contribute as much as possible before the April 15 tax deadline. The IRS allows individuals to contribute up until the very day of the deadline, so you can actually wait. The benefit of maxing out your IRA is that you eliminate the need to pay a higher rate when the time comes that you start making withdrawals.
Staying Prepared
Preparing for tax season well ahead of time ensures that it runs smoothly. You don’t want to be buried in a mountain of paperwork on April 14. Your documents should be on their way to the IRS by then, so you can sit back and wait leisurely for your return.
Over to you
How do you prepare for the tax season? Share your tips and experiences to help others in the comments section.
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