Nine Simple Things to Do to Get Ready for Tax Season Right Now!

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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.

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11 thoughts on “Nine Simple Things to Do to Get Ready for Tax Season Right Now!

  1. If one is normally filing the EZ form, then buying software is overkill.

    If one needs extra forms, go to irs.gov and download them.

    Trent – how about a list of what tax forms people should be expecting?

  2. I think you accidentally “You don’t want April to arrive “. Other than that, thanks its gotten me thinking about what new changes buying that home is going to do to my taxes.

  3. Gosh. I am a freelancer, which can be a bit trickier tax-wise, but it generally just takes me one hour to do my taxes. The first time was the hardest, after that I got the hang of it and I often do other people’s taxes for them. I file bills and receipts right away and I generally update my spreadsheets quarterly (at least).

    Come tax time, it’s just a matter of opening an Excel document and getting all the figures from there. I rarely have need for the documents issued by third parties (clients, charities, etc), which tend to arrive later than I’d like. I use them mostly to check their numbers against mine.

    I am often amazed when I read that in the United States an average person is likely to have to print dozens of pages and mail them. Here you can e-file, but if I printed those forms, I don’t think they’d be more than 10 pages, total.

  4. Trent,

    Last year, my first year as an independent contractor, I submitted my taxes on the LAST possible day. I didn’t plan on this, it just seemed like a momentous task to gather all my information and calculate my taxes, all while working.

    I love your tip on starting early. It’s been on my mind to do so, and now it will be in my Google calendar.

    Merry Christmas Trent!

  5. I actually enjoy doing my taxes. I keep very well-organized records (want to see my first-grade report card? I can find it in a flash! OK, maybe I’m mildly insane in the record-keeping department). But in any event, I would say it takes me less than 2 hours, a sheet of paper, a pencil, and a calculator. I have excel and I’m competent with it, but I never felt the need to get any more high-tech with my financial records. Having your records organized and readily accessible in the first place is the key!

  6. I use turbo tax online. If you’re under a certain income threshold (something decently high, like $30k), you can e-file for free and don’t have to pay for using the program. I often do my taxes by hand *and* with the program to see how things shake out. I just fill out an EZ form, but I’ve never had a year where I worked in any less than two states, so it’s good to make sure all my state forms are submitted properly.

  7. Great post. I would have also put “And one Thing to Do For Next Year’s Taxes”. And that is, start to think about them on january 1. As soon as I got my income taxes into my train of thought throughout the year, my refunds went up and doing them at the end of the year became a breeze.

    Get a filing system and save your deductions as you go along.

  8. If you have a business expense coming up early in January, PAY IF BY DECEMBER 31 INSTEAD. That way you can write it off on this year’s taxes and get the deduction a whole year earlier. For instance, if you’re paying a power bill early (business expense) in January, pay it in December and write it off for the April 15 tax filing, instead of having to wait to April 15 2111 to get the benefit. You can do this with postage expenses if you use stamps, packaging supplies, just about anything, PAY IT NOW INSTEAD OF NEXT WEEK.

  9. This is our first round of taxes as business owners, and I’m so scared! I always did my own taxes before, but this year we are using an accountant so we don’t screw it up. We set up a separate tax account for our business and every month we deposit enough to cover our sales taxes and then some. (We don’t have to pay any employees yet, thank God!) Hopefully we will have enough saved up to pay our accountant and pay any tax we still owe.

    We’re sitting down on New Year’s Day and trying to get all of our paperwork in order. This is one area we have been sadly lazy on getting organized.

    Not to go all anti-government rant on everybody, but I think it sucks that small businesses get whalloped at tax time. Running your own business is supposed to be part of the American dream, right? Paying 15% federal self employment tax just stinks!

  10. I often hear about charity at the end of the year. nothing against it, and i am all for giving to favorite and needy organizations / temples etc, however, from tax perspective how much is it going to make a difference?

    I tried my 08 s/w couple of weeks ago for an estimate, i know i owe some money as of now, and working around charity, i don’t see much of a difference in my tax liability, unless i have/willing to give several thousands, which is not likely.

    in an hypothetical example i saw on IRS guide, depending on his unique tax constraints, giving about $4000 to charity would save him about $300 or so. so does it mean give away several thousands to save couple hundreds?

    I am trying to understand while also considering adding another check to my favorite org.

    just my thoughts… just confused…

  11. No Ram you aren’t confused. You would be giving away thousands to save a few hundred. I grit my teeth when people tell me they bought a house or they are not paying off their house ahead of time because of the tax advantage. They pay several thousands of dollars in interest, so they can save a few hundred in taxes. Does not compute! Now, if you could take the donations or interest directly off the amount of tax you owe, that would be a whole different issue!

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