How to Prepare All Year For Tax Time

on August 24, 2012

Tax season is a huge headache for many people. The April 15th deadline creeps up on people before they can realize where time went. Rushing around at the last minute to prepare your documents for tax purposes is a bad idea. You could forget important documents and details that could give you more breaks when it comes time to pay taxes or to get a better income tax return. Overwhelming an accountant will also likely cause you to have to pay more to have them take care of your taxes. Avoid the hassle by taking care of your taxes all year.

If you run a business, you know how tedious taxes can be. Instead of shoving everything into unorganized drawers, desks, and cabinets, try a different approach. You could buy some folders for each month of the year and place needed tax documents in each one. Label each folder with one of the twelve months. This will help both you and your accountant to stay organized in tax season. Within each folder you could also choose to make little pockets for different taxable items and services for your business.Keep receipts of your expenses neat and orderly. Gas, utility bills, home repairs, car repairs, and other costs can help you get more deductions for your taxes. Keep these in the monthly folders along with your income statements. While you might see someone rushing into an accountant’s office with piles or random papers at the last minute, you could walk by and small with neat folders and completed tax forms in hand.

It’s important to be adamant about maintaining organized folders for taxes. One receipt or expense that goes unrecorded will hurt your deductions and returns. Your attention to detail could be the difference between hundreds of dollars. Money is on the line every year in tax season, and only the most organized people save the most money possible. Think about what you could do with all of that extra money just based on a few minutes of attention to your tax organization each week.

If you’re an independent contractor, then perhaps your income isn’t taxed by the government. You would still have to report your earnings even though the government might not take taxes out of your earnings. You will have to pay all of your own taxes by the end of the fiscal year. Instead of waiting to pay everything at the end of the year, set up a way to pay your taxes on a quarterly basis. This will help you to stay organized and will help your accountant get you the most money back you can get.

You could even decide to do some of the math yourself once per month. Once one month has passed and you have everything together for that month, count up the total amount of money invested in that month’s folder. Your accountant will check to make sure your math is correct, but you can still get a good idea of what you can expect your tax situation to look like at the end of the year using this method. There will be other work you need to do in order to finish your taxes on time, but with these tips you can get a good jump on your situation.

Preparing for taxes is never a fun adventure. Learning how much money you have to give up to the government is usually stressful and heartbreaking. You can give yourself the best chance to save the most money if you stay on top of your tax work throughout the year. Always try to make 20 minutes per week your tax work time.

Found in: Taxes
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