Plan Ahead to Take the Stress Out of Tax Day

Plan Ahead to Take the Stress Out of Tax Day

April 18 is a dreadful day for many people, simply because it's the deadline for filing income taxes. The truth is this day doesn't have to be ominous or overwhelming. You can reduce your stress and improve your financial future simply by getting a jump on your income tax preparation early.

Here are some tax strategies worth considering:

1. Gather your records early. Take the time to gather all of your documentation together beforehand so you have everything you need to get started. Gather your past tax returns as well, as these will provide valuable insight for where you can save money on your taxes in comparison to previous years.

2. Determine how you'll complete your return. You can prepare your own taxes or hire a tax professional to walk you through the process. Initiate your search for a suitable tax preparer as early as you can, because if you wait until the last minute, you may find that the preparer you chose is swamped with others' tax returns.

3. If you plan to file on your own, you can plan and prepare ahead of time by reading up on current tax law changes, tax credits, and deductions.

4. Look to government resources for help. The Internal Revenue Service website and taxing authority websites for each individual state are valuable resources for individuals seeking tax help. Use these free resources to your advantage to get some extra assistance while filing your taxes.

5. Estimate your taxes. Estimate your taxes ahead of time so you know what to expect. The IRS offers withholding calculators and other useful tools to help you determine what your taxes will be like prior to actually filing. This estimation will help you prepare for the actual filing, especially if you'll end up owing money when you actually file.

6. Make last minute tax-deductible purchases. Especially if it looks like you'll owe money on your return, before the end of December, make any purchases that can give you an extra tax deduction. If you're self-employed, purchase necessary items for your business.

7. Contribute as much as you can to your tax-advantaged retirement fund. This will reduce your income even further, leaving you less of a tax liability.

8. Donate cash or items. Remember to make your donations before December 31st so you'll receive your tax deduction for this year. Be sure to get a receipt!

9. File as early as possible if you expect a refund. The sooner you file, the sooner you'll receive your tax refund. You can file in January as soon as you have your paperwork together.

10. E-File your return. There are a number of benefits to e-filing, or electronically filing, your tax return. For example, most E-file software will compute tax credits and deductions for you based on the information that you put in. Plus, if you're getting a refund, it's quicker than mailing your return.

The Bottom Line

The best way to get the most out of your income taxes is simply to get a jump on them early. With planning and preparation, you can maximize your deductions and simplify the filing process without stressing yourself out along the way.