Do you dread tax season? All the paperwork and scrambling can be stressful. Here are three tips that can make life easier at tax time.
I have a confession. It's almost April and I haven't got my tax stuff together. I've never waited this long to get going on my taxes, and I feel a little bad that I'm going to be dumping things on my accountant at the last minute.
The fact that I have an accountant is one of the strategies I use to make life easier at tax time.
If you want to avoid a tax time disaster in the future, here are three strategies that can help. It might be too late to avoid all the stress this year, but you can put systems in place to ensure that this never happens again.
1. Use Accounting Software
One of the best ways to make life easier at tax time is to use accounting software all year long.
For your personal finances, it makes sense to use financial software that offers tax-deductible categories. Personal Capital can help you generate information about tax deductions and keep track of what you need to know. Popular software Mint can also help you categorize your spending so you can quickly find what you're looking for.
I use Personal Capital for my finances, and I love it. It's possible to check a box that lets you know what's tax-deductible. Plus, I can quickly generate reports that help me as I prepare my P&L statement and review things that belong on my Schedule A.
It's especially important for home business owners to pay attention to their accounting and payroll. You can make life easier at tax time by using accounting software regularly.
You want accounting software, like Xero, Wave, or QuickBooks, that can manage your payroll and keep track of tax categories. When tax time rolls around, having reports and information at your fingertips is extremely helpful. You can also use a tool like Gusto to help you keep things organized and on-time.
Having this type of software helps you keep everything organized so you aren't scrambling when tax time rolls around. All you have to do is run a few reports.
2. Hire an Accountant
Let's be honest. This is the number one thing I do to make life easier at tax time. I've had an accountant prepare my taxes for the last 10 years.
I still have to gather the information and organize it in a way that helps him get everything right, but it's much easier than actually preparing my own taxes. And well worth the cost.
When you hire an accountant, it makes sense to choose someone who understands your situation. I use Eric from AccountLancer because he understands freelancers and home business owners. He's fast, efficient, and honest.
Once you start working with an accountant, you will never go back. It's one of tax time's pure pleasures.
But, even if you don't use a human accountant, you can still make life easier at tax time with the help of tax software. TurboTax and H&R Block both offer software you can use to figure and submit your tax return. It's a nice compromise if you aren't quite ready to hire an accountant.
3. Set Up a Filing System for Tax Documents
My final strategy to make life easier at tax time is to have a filing system for tax documents.
My system is really simple. I have a file folder sitting on my desk. When tax-related documents arrive, I just put them in there. Business receipts, charity receipts, pay stubs from checks for freelance work — all of it.
I also have a way to organize the stuff that comes in via email. I create labels in my email inbox for tax categories like Business and Charity. When something comes in, I file it in the right area. At the end of the year, I move everything into a new label with the tax year. So, at the end of 2018, I created the label Tax Year 2018 and moved everything in those folders to that label.
Now, everything is saved in one place if I need it for taxes.
You can also do something similar with encrypted folders on your computer. Just make sure you have a backup on an external drive or in the cloud. An app like Shoeboxed can also help you by allowing you to snap pictures and organize receipts quickly and easily.
If you file things away a little at a time, as you go along, it's much easier to stay on top of things and find exactly what you need come tax time.
What are your strategies to make life easier at tax time?