5 Tax Tips
by Sarah Welch and Alicia Rockmore
It’s here again – tax time! Next to getting a cavity filled, sitting in rush hour traffic, and being seated next to someone with poor hygiene on an airplane, doing your taxes ranks right up there with your least favorite things to do, right? What is it about all those forms and the acronym IRS that sends people running for the hills? Hiding in the sand isn’t going to help you (the IRS DOES find you), but with a little expert guidance, you too can tackle tax season with a smile. We thought we’d turn to some experts for some surefire tips for tax preparation for this year and next.
Here’s what we learned from some of the country’s top financial planners and accountants:
1. Look at Tax Prep as Household Finance 101:
This is the one time of the year that most people have a clear picture of their entire finances. It’s all out on the table, literally, so use that chance to start some planning for the future, says J. Michael Collins, a consumer economics specialist based in Madison, Wisconsin. He mentions that it’s a great time to open a savings account if you don’t already have one to put away some of the tax refund you have coming to you.
2. Divide and Conquer:
Whether it’s a function of the economy or just a result of the new wireless world, more people than ever now work on their own as consultants, freelancers, or independent contractors. It’s easy to confuse the dry cleaning receipt (not deductible) with the parking ticket from a business meeting (deductible). That is just one of the reasons why Tampa, Florida business writer Colin Flood suggests opening a separate checking account to keep business expenses easily organized and trackable.
3. Give it Up:
You know that closet in the guest room that is just bursting with things you don’t need? Get rid of the extra stuff and you’ll find yourself saving on your taxes. Plan donations, says Jeff Staley, Managing Partner of Freedom Tax Relief in San Mateo, CA. Staley reminds donors to get receipts and when you’re not sure how much to deduct, go online to sites like www.itsdeductible.com to learn fair values.
4. The Virtual Shoebox:
Receipts can be the bane of your organized office but now with a new service called Shoeboxed.com. Simply dump all of your receipts into a pre-paid envelope and ship it to their location in North Carolina, where they scan and upload all of those bits and scraps into one neat Excel, PDF, or Quickbooks file. The best part? You can take advantage of their free shredding service, since their files meet all IRS requirements.
5. Start Planning for Next Year:
“What?” you may ask, since you’re just signing the forms for this year, but sketching out the upcoming year and paying estimated taxes may help you ease a tax burden, says Staley.