By (Name withheld at request of author)
Be honest: Were you like me and waited until the last minute to file your taxes this year? Even though I promised myself a year ago that I would start anew? Or did you miss the deadline entirely and have to apply for an extension — again, at the very last minute? Some of my procrastinating groupies even dropped their tax information to their preparer a couple days before the deadline and then were upset they had to file an extension! It’s like they think the tax filing deadline changes every year and they don’t understand the significance of APRIL 15! But I would like to help you make your tax filing process less stressful in the future, by sharing advice that I have never heeded.
If you found yourself anxiously digging through a year’s worth of paperwork and scrambling to find your W2 and 1009 forms, here are some tips to make the whole process run more smoothly for 2019 — BUT YOU MUST START NOW!
Start as soon as possible — LIKE TODAY. I recommend you organize your data and keep a file or large envelope as a central gathering spot for all your tax related documents and receipts. Starting early will also give you time to consult with a CPA in order to make sure there’s nothing you overlooked. Getting your tax information to your CPA in late February or early March will provide adequate time for preparation. This also allows time to consider IRA contributions and other tax savings matters that may be available to you.
Keep the tax law changes in mind. Study them closely. Click here for thorough guides and articles covering individual aspects of the 2017 Tax Cuts and Jobs Act and how the new law might affect you or your business. Given that most taxpayers cannot understand the IRS code, let alone interpret it, a professional — like a CPA — can deliver better value, if utilized properly. Fun Fact: The instructions for the 2017 FORM 1040 EZ (the simplest of forms) was 184 pages — how is that for simplicity?
Take advantage of your 401(k). Increase your personal contribution by at least one percent per year to reach your savings goal and experience the benefits of your employer’s matching contributions. The accumulation of those rather smaller amounts begins to compound quite nicely! And it grows on a tax-deferred basis.
Pay yourself first before wasting dollars. Segregate your money on a regular basis to fund tax payments. A good way to do this is to set up an automatic transfer to your “tax savings” account. For taxpayers that are required to make quarterly estimated tax payments, segregating those funds into a separate bank account — maybe even at a different bank — will give you peace of mind when it comes time to remit to the federal and state governments that the funds are there, minimizing the risk of penalties and interest.
Be deliberate in managing your finances. Don’t be like me, the Procrastinator. Gather and organize all of your tax forms in a file where everything is labeled clearly. Take that difficult first step in developing a plan to reduce your credit card debt (credit card interest is not tax deductible) or pay off your student loans. Set weekly or monthly goals for paying off a certain amount. These are just a few of the many things you can do to make your financial situation less overwhelming, especially come tax filing time. Review your tax saving activities monthly to make sure you are adhering to your personal plan.
Of course, you can always file a six-month extension with the IRS, but it’s better to rip the Band-Aid off and take care of your taxes as early and easily as possible. Remember that filing an extension is only an extension of time to file. You are still required to pay the taxes due as of the filing deadline of April 15.
Conclusion: You know the saying: There only two things certain in life — DEATH and TAXES! One you can control, the other you cannot. Take control NOW, to not only make filing your 2019 taxes more efficient, but to enhance your ability to make timely financial decisions that have a tax impact. Many times there are alternative ways to minimize a transaction from a tax standpoint, and advanced planning with a CPA is regularly advised.
If we can assist you further with achieving success in your business or personal affairs, please contact Sponsel CPA Group at (317) 608-6699.