How to Stay Calm During Tax Season
April 18, 2022
As the tax deadline looms,
follow these tips to stress less.
Just hearing the word taxes is enough to send some people into a tailspin of woe. We get it. Even the most organized among us have been known to procrastinate until a few days before the deadline for filing federal income taxes – even when we know we are likely to get a refund.
If you are among the estimated one-third of Americans who wait until the last minute to prepare and file your returns, the deadline this year is on April 18 for most, here are some suggestions to help remove the stress often associated with tax time:
Gather your documents.
Before tackling your return, or sending it off to a professional, make sure to gather all the documents needed to complete it. If you are a full- or part-time worker, your employer should have sent a Form W-2 in the mail by now. If you are paid as a contractor or freelancer, employers should send a 1099 form. If you haven’t received the appropriate documents, contact the company’s HR or billing department immediately to request it. It’s important to note if you were paid less than $600 as a freelancer during the year, companies aren’t required to send a form, though you are still required to report the income on your return.
At the same time, create a computer or paper file as you collect any investment or other financial account documents you need, including those for interest paid on a mortgage or home equity loan. Don’t forget to track down proof of student loan interest, health insurance, and any other deductible expenses from 2021, including how much you paid for vehicle license plates, college tuition and charitable contributions.
Lower your tax liability.
If you have a Flexible Spending Account (FSA) or Health Savings Account (HSA) contributing to those accounts before this year’s April 18 filing deadline can help reduce your tax liability and possibly quell any related fear you may feel regarding a high tax bill. The money directed into these accounts, which can be used for a variety of health-related expenses, has the ability to go further because it’s not taxed. A key difference between the two is that FSA funds expire every year when not used by a certain date and HSA money can be rolled over annually or transferred when you change employers. Even better, HSA dollars can be used in retirement. If you are offered an HSA at work, it operates like a 401(k) account where contributions are taken from your paycheck on a pre-tax basis. Ultimately, that helps to minimize your tax bill.
Keep receipts (and a calendar).
Just in case you are ever audited by the IRS, it’s a good idea to keep the actual paper or email receipts for your business expenses, not just credit card statements. If you don’t have a receipt for a business expense – say a new laptop – the IRS won’t let you deduct the cost on your tax return. If you are inclined to go paperless, consider an app for your phone that allows you to take photos of receipts and expenses and store them electronically.
For those who prefer old-school methods, ditch your shoe boxes and store everything inside folders organized by year inside a filing cabinet. Whatever option you choose, make sure to write down each expense and note why it’s related to your business. It’s also important to keep a detailed calendar of client meetings, business meals and networking events.
Know where to find free help.
For individuals and families who earned $73,000 or less in 2021, there are free resources available to help you file your taxes at IRS.gov, including this option for no-cost filing at IRS Free File. With the free file option, tax software providers make their online products available at no charge. This year, there are eight products in English and two in Spanish. There’s also free one-on-one tax preparation help across the U.S. available through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.
This article was originally posted on savvymoney.com
The material provided on this page is for informational use only and is not intended for financial, tax or investment advice. VisionBank and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.