As the adage goes, life has three absolutes: life, death, and taxes. Both life and death come swiftly, and occasionally without warning, but taxes come about a little more frequently and with significantly less fanfare. For anyone employed or earning income in any way, taxes are a reality that is virtually unavoidable, leading to complicated filings at least once a year. While filing taxes yourself may not be pleasant, it doesn’t have to be a burden that ruins your April each year. With proper preparation, it’s possible to make self-filing straightforward and relatively painless.
Taxes take a lot of preparation, no matter how complex your personal financial situation may be. Without staying organized, it can be easy to make simple mistakes, ranging from omitting taxable income the government will notice to missing deductions that could save you money. Instead of leaving receipts in your purse or your W-2 on your desk, create both paper and digital folders to keep tax documents organized. It may not be intuitive during the year, but when tax season rolls around, you’ll be glad you did.
Take Advantage of Possible Deductions
From business expenses to mortgage interest, there are hundreds of ways to minimize your taxable liability. While most taxpayers are aware of the basics, like deducting state tax paid and charitable deductions, there may be many more opportunities to save that you don’t know about. Instead of sticking with the basics, evaluate all of your options and look for other things you may be able to deduct, ranging from job searching expenses to the money you spend on daycare.
Choose the Right Medium
Filing on paper is still an option, but few taxpayers go this route because the margin for error is so high. Today, numerous websites and software filing options are available that can make the process easier than ever. Free alternatives exist, but largely for taxpayers with little income and few deductions. Prior to picking a software or website, do research on the intricacies of your personal tax situation and choose an option that caters to your needs. If you’re not self-employed, you may not need to pay for the upgraded package that includes Schedule C, but if you are, you don’t want to find yourself paying extra fees to add it in.
Note Legislation Changes
While often unfortunate, tax legislation changes regularly. Despite the occasional newspaper article, most of the taxpaying public does not find out about changes to the tax code until it’s too late. Although it may not be interesting, keeping an eye on the activities of the Internal Revenue Service can keep you from banking on a deduction that no longer exists, like making a large taxable gift only to find that the limits have changed and instead of using your estate tax exemption, you're stuck yourself paying thousands in gift tax.
Whether you love or hate the tax system, there’s no way to avoid the annual filing requirement. Filing taxes yourself may not be fun, but it doesn’t have to be quite the burden it is currently. By preparing properly, understanding your situation, and staying up to date with the U.S. tax legislation, you can make the process a little easier.