If I were in a public setting I would ask for people to raise their hands to indicate whether or not they enjoyed filing taxes. I’m certain I’d see more hands raised for the “not enjoying” taxes option than the other. It is often said that there are three certainties in life: birth, death and taxes. Taxes are never a fun subject, especially when we have a government that likes to live without a budget and spends us into oblivion. However, this does not free us from the duty to pay our dues as it were and to be responsible to file our taxes.
There can be a lot of work that goes into filing taxes and while many hate doing so, it still requires our attention to ensure the tax filing process goes smoothly so we can make sure we have jumped through all of the hoops the IRS throws our way. However, there are a number of things you can do to streamline the process and make it easier for you in the long run and work for you pretty much every year. Before I go any further, I want to give the disclaimer that I am NOT a tax professional and that if you have a specific tax question to ask a certified tax professional who would have access to the latest professional tax and accounting software.
Keeping Good Records are Key to Filing Taxes
One of the easiest ways to make filing taxes smoother is keeping good records. There are various things that might impact your taxes for the better or worse and a good record keeping system is vital for this. Do you have business mileage or mileage for trips to the hospital/doctor? If you do, then it’s possible that mileage would be deductible for you. An easy way to keep track of this is by having a small notebook in your car. Do keep in mind that the IRS wants specifics and often looks at bloated mileage as a red flag, so make sure to notate the Who, What, Where and Why of your trips along with the specific to/from mileage and date. We do this ourselves for our business and it takes only a minute to record the information. A similar thing can be done for medical expenses, giving to charities, etc by keeping a folder of all pertinent information that relates to giving or expenses that might be tax deductible. Please keep in mind that many deductions are only available if you itemize your taxes.
Keep Your Professional Life Separate From Your Personal Life
If you run your own business like I do, then you know how harried life can get when you’re dealing not only with your personal finances but also your professional finances. Some of these things might be difficult to keep completely separate, but the easiest way to do so is by setting up a business checking account. This allows you to deposit all of your professional income into the account and not have to worry about co-mingling it with your personal income. This might seem like just ANOTHER thing to manage, but it actually makes life much easier and did not take much to set up. We set it up with the same bank we have our personal accounts with and thus have the same login for both accounts and can take care of everything from one place. Having a business account will also make it much easier when your filing taxes as you should be paying for business exclusive expenses straight from your business account throughout the year and won’t have to separate it from your personal expenses.
Don’t Wait For the Last Minute
I hate to break it to you, but April 15th is coming up very shortly, don’t put off taking care of all the steps associated with filing taxes to the last minute. I’ve seen way too many people in my line of work do this and it only ends up in having headaches at the end of the day. I know that staying on top of your records might not be the most fun, but a little bit of work throughout the year should make it much easier for you when it comes time to be filing taxes.
Personally speaking, Mrs. Frugal Rules and I discuss our business mileage and expenses each week and I enter them into an Excel spreadsheet. This allows me to know where we are at at any given time, but it also means that at the end of the year the majority of my work is done and I can forward all of our information to our tax professional. Another benefit of not waiting until the last minute is that you can also use it to analyze your withholdings so you’re not getting too big of a tax refund the following year.
Hire Professional Help to File Your Taxes
With the rising popularity of filing taxes online and tax preparation software it allows many to handle filing taxes simply as the program walks you right through it. For years I used H & R Block’s software and had no issues (and enjoyed it, to be honest). However, with the growth of our business there just became too many moving parts to filing taxes and I reached a point where I was not comfortable in handing them myself. As someone who likes to be frugal and do things myself, this was a difficult but necessary decision. It has saved me a lot of time and I now have the confidence that our taxes are done correctly and done by an expert who’ll maximize our return. If you find that you’re over your head in filing your own taxes, then a tax professional is a great option. If you’d rather handle filing taxes on your own then there are numerous tax preparation options available online that are easy to use.
How do you handle your taxes? Will you be filing taxes on April 15th, or do you get them done early? What tips do you have to make filing your taxes easier?
Photo courtesy of: Darren Shaw