Photo: Kelly Sikkema / Unsplash
Tax season can bring more than its fair share of stresses. Some people worry they don’t have enough money to cover their tax bill, while others are stuck trying to determine exactly how much they owe. In either case, there are ways to reduce that stress.
So, whether you’re filing alone or hoping to find a good tax agent to help you out, below are six strategies to make this tax season stress free.
1. Gather documents throughout the year
Organizing your tax-related documents as they arise throughout the year can make the final tax-filing process much smoother. Start by creating a designated spot for anything tax related. Any time you receive a new tax document, place it there. To take it a step further, consider labeling them with a brief description. When tax time rolls around, you’ll have everything in one convenient place, and you’ll know precisely what it contains.
2. Store your previous tax returns
Just as it’s important to prepare this year’s taxes by gathering the necessary documents throughout the year, it’s also important to have last year’s tax documents readily available. For most taxpayers, this year’s and last year’s taxes are pretty similar. Referencing older documents can help you confirm specific numbers and see what documents are required.
Alongside this year’s tax documents, keep a secure but easy-to-find folder with tax records for the past three to seven years. The IRS suggests different timelines for different documents, and the same is likely true for tax offices around the world, so be sure to check the rules in your country to confirm.
3. Know the required documents
Know where your money comes from and where it’s stored to better determine the tax-related documents you need. For example, if you’re employed by a company, you’ll require different documents from those who are self-employed.
Consider home mortgages, student loans, and other forms of debt alongside interest from checking or savings accounts. If you receive any capital gains or dividends from investments, know what documents are required.
4. Go digital
Instead of risking the loss of paper receipts, consider digitizing them so they can be stored in the cloud and easily found. The same logic applies to your tax returns from previous years. If you want to be extra safe, keep paper copies and digitize them.
5. Identify personal and professional changes
When preparing for tax season, it’s important to understand how changes in your personal or professional life may affect how much you owe. For example, if you recently got married or started a family, then your filing status will likely change.
That change in status might also affect the kinds of deductions and credits available to you. Deductions reduce your pre-tax income, while credits reduce the total amount of tax owed. Together, they may lower your overall bill, so they’re worth looking into in depth.
6. Contact professionals when needed
Making mistakes on your tax forms can be costly. Although tax-filing software is certainly helpful, sometimes your circumstances aren’t so straightforward. Factors like owning a business, earning a higher income, working overseas, and investing in a broad range of assets can all complicate your tax-filing status.
In that case, it may help to find a qualified tax adviser. Not only will they help you file your taxes properly, but they’ll take advantage of all available tax breaks and correct any mistakes on your behalf. Alongside saving time and money, this can profoundly reduce your stress levels.
By gathering documents throughout the year, storing everything safely, staying abreast of any changes, and contacting the pros when needed, you can make tax season far less stressful.