Now that the holidays are over and 2017 has begun, it is a good idea to start off on the right foot. Just because you’ve got those three extra days (April 18th deadline) this year, it does not mean you should procrastinate where your taxes are concerned. Tackling your taxes now will save you a ton of time, money and stress come this spring.
Here are a few tips to bear in mind:
1.) Compile your 2016 Expense Sheet and Begin Anew for 2017
Forbes writer Kelly Phillips Erb – who specializes in writing about tax issues and topics – recommends that taxpayers finish tracking 2016’s expenses as soon as possible and to use a clean sheet for 2017. You can do this by whatever means works best for you – e.g. through a ledger, a notebook, accounting software, spreadsheet, etc.
It is important that any deductible expenses from December (or prior) be recorded before they become forgotten or lost in the shuffle. Erb also strongly urges taxpayers to track their expenses by actively recording them as opposed to simply depending on bank statements.
2.) Consider your refund
If you are expecting a tax refund, then the sooner you file, the sooner you will receive it. However, you cannot file early if you are not organized and prepared so get moving!
*It should also be noted that the sooner you file and receive your refund, the less likely you are to be a victim of a tax identity theft and of having your refund claimed by another.
3.) File on time to save money
Unless you have filed an extension (in which you are granted 6 extra months) or are due a refund, you will be penalized if you do not file your returns on time. The IRS assesses penalties and interest charges on a case-by-case basis, but why give them any more money than you already owe?
4.) Start early to reduce or eliminate errors
Anything done in a hurry or against a looming deadline is going to drastically increase one’s propensity for errors. Filing taxes is no exception. Even if you use a professional tax software, or even a service, waiting until the 11th hour will spike up the chances that you make a mistake when providing information or filling out forms.
According to John Hewitt, founder and CEO of Liberty Tax Service, the most common errors he saw in previous tax returns include (but are not limited to): incorrect Social Security Numbers, incorrect filing status and failure to claim credits or deductions.
Filing early gives taxpayers adequate time to check and re-check their tax forms and gives them ample time to edit any errors prior to the filing deadline.
5.) Tips for Self-Employed Professionals
If you are self-employed, your tax-paying obligations are a bit different as you will need to send quarterly estimated tax payments. If you are new to self-employment and have never paid taxes this way, it would be wise to seek help from a tax professional or other self-employed people you know who can help you determine how much to pay and what deductions to take without being penalized.
A good piece of advice, offered by freelance writer Reyna Gobel in an Investopedia article, is that self-employed professionals keep track of their income and expenses on a separate debit or credit card.
She also suggests that when it comes to quarterly income, taxpayers should overestimate when paying their taxes to avoid possible penalties. Any monies you overpaid, you will get back as a tax refund when you file your annual tax return.
It may seem like tax season is months away and it is much too early to fret about any of this. However, there are certain things in life you can never be “too prepared” for and taxes are most assuredly at the top of that list.
Also, you do not want to make the same mistakes you have made in the past which have brought you nothing but stress and agony. It was Albert Einstein who defined insanity as “doing the same thing over and over again and expecting different results.”
Break old habits and you’ll get new results.