With Christmas comes the new year, and with the new year comes the painful cycle of preparing one’s taxes.
I personally loathe tax time – to me, it’s an example of how the government simply doesn’t work very well at all. The tax code should not be tens of thousands of pages in length when it’s expected that everyone navigate it.
Yet, that’s the situation we’re dealt with.
Thankfully, there are many things we can do – starting right now – to make things easier for us when we actually file. Here are nine steps you can take right now to make things easier.
1. Prepare a central location for all of your tax documents. It might be a desk drawer or it might be a folder. Just be sure you have one single place for the tax documents you’ll receive in January and February, so that when you do file your taxes, you can easily and quickly find all of the documents you need in one place.
2. Use this last week of the year to take advantage of any tax breaks. For example, there are many tax breaks available for simple energy efficiency improvements that you can do in this final week of the year.
3. Finish up your charitable contributions. If you’ve been intending to give money to charity this year, get it done now so that you can claim the deduction on your taxes. Keep careful track of what you donated – perhaps even in that central folder for your documents.
4. Purchase and install the tax software of your choice. The mainstream tax software packages all do a pretty good job. Get one early, install it, and make sure it’s updated (and you know how to use it) before crunch time rolls around. You don’t want April to arrive
5. Start hitting some tax-oriented blogs. If you’re obsessed with squeezing every nickel from your return, you can start subscribing to solid tax-oriented blogs like the WSJ Tax Blog or Tax Rascal. (I’m partial to the TurboTax Blog because I’m occasionally a guest contributor.)
6. Do a rough estimate. This is the perfect time to do a “back of the envelope” estimate to see whether or not you’re actually going to owe taxes this year. It doesn’t have to be perfect, but it’s a good idea to do it – and to estimate high, so you don’t get a nasty surprise in a few months.
7. Start saving. If you do have a bill coming, start saving to make sure that bill is well-covered. Again, aim high – having too much savings isn’t really a problem, but not having enough really can be.
8. If you’re afraid of doing taxes yourself, find a good preparer. This is a good thing to ask your friends and associates about. Who prepares their taxes? Do they do a good job? Is there anyone to avoid? You might even find yourself with a foot in the door of a really good preparer.
9. Come up with a plan. Don’t wait until the last day to do all of your taxes at once. Do it a bit at a time, spread out over a longer period. This allows you to check over your work with fresh eyes (and perhaps notice things you didn’t see before). Come up with a plan – maybe you’ll spend an hour each Saturday starting in February on your taxes. Add it to your calendar now so that you’ll know you’ve got to do it.