Tax season is approaching rapidly, so it’s time to start preparing for a smooth and successful filing deadline. Getting your ducks in row early can save you from a major headache in April so, whether you’re going it alone or working with an accountant, it’s always best to get started as soon as possible. You can make your tax day stress-free by following these 5 simple steps for a smoother filing deadline. Here are the best tax tips for a stress-free tax day in April:
1. Spring Cleaning
Whether you’re using a professional tax prep service or filing yourself, organization is key. If your 2021 books are a mess, now is the time to get them in order.
If you use accounting software, make sure all your 2021 expenses are categorized correctly. Also, make sure you have receipts and documentation supporting all of your deductible expenses.
You should also take some time to do a bank reconciliation this month. Reconciling your books will help you identify any discrepancies in your bookkeeping, and you’ll have plenty of time to address any issues you discover if you get started soon.
Getting your books in order now will save you time and spare you from unnecessary stress. Furthermore, it reduces the likelihood of mistakes that could cause IRS issues down the road.
2. Follow Up on Important Tax Forms
You should’ve received most of your important tax forms by now, but you should double-check to make sure you have everything you need.
There’s nothing worse than discovering you are missing a critical 1099 at the last minute, so you should make sure you have everything you require while there’s still time to address any issues.
Furthermore, don’t assume you can omit income from your return because you didn’t receive a 1099. It’s a dangerous game to play, and there’s a chance that the IRS received a 1099 even if you didn’t.
If your reported income totals don’t match what the IRS has on file, you are virtually guaranteed to receive an IRS inquiry at the very least.
Also, make sure you have all of your tax forms from any apps you may use to earn income, like Airbnb, Upwork, etc. Don’t forget to get your tax forms from your stockbroker or IRA carrier as well.
If you don’t have what you need by now, don’t sit around and wait. Follow up and see what the status of the forms are. There may have been a mistake or an oversight that needs to be corrected.
3. Prepare Your 2021 Tax Payment
As a rule of thumb, we recommend clients put aside 30% of their income to cover tax expenses. If you follow this rule, you should have more than enough on hand to cover your tax bill.
However, things happen, and you might not have been able to set aside enough. If you’re not sure where you stand, now’s the time to find out.
Plug your numbers into your tax software to get a rough estimate of your tax bill, or ask your accountant how much he expects you’ll owe. Then, you should know relatively quickly if you have enough cash on hand.
If you don’t have the cash to cover your bill, you have a few options. First, you can go into a savings scramble and set aside the funds you need from your incoming cash. However, this might not be a viable approach, depending on your business’s cashflow.
The second option is to apply for an IRS payment plan. IRS payment plans allow taxpayers to spread their tax bill out over six months with no penalty. Long-term payment plans are also available at a slightly higher interest rate.
However, there’s a catch. You must apply for your payment plan BEFORE the April 15th deadline to qualify, so don’t wait to get the ball rolling if you plan to go through with a short or long-term payment plan.
4. Last-Minute Retirement Contributions
You have until April 15th to make tax-deductible retirement contributions for tax year 2021, and you can rack up some substantial last-minute deductions by taking advantage of this window.
Depending on the type of retirement account you use, you could save thousands on your taxes by maxing out your contributions ahead of the deadline.
However, if you already hit your 2021 contribution limit, this option is off the table for you, as you can only contribute up unto the specified max for your retirement account.
If you have extra cash, last-minute contributions are an excellent way to reduce your tax bill before the deadline.
5. Choose a Tax Prep Accountant
If you’re planning on hiring an accountant to file your taxes, you should find one ASAP. It’s a busy time of year for tax pros, and you might have difficulty finding one if you don’t take care of it soon.
You should also consider hiring a tax pro if you have a complicated return this year. Moving out of state, buying a new home, and other unique scenarios can make taxes much trickier.
An accountant doesn’t just file your return, they ensure that everything claimed on your taxes is accurate and compliant with IRS regulations.
If you use tax software, don’t assume it will automatically address any complicated tax issues, or you could wind up with the IRS at your door.
The best way to ensure your return is accurate, compliant, and on-time is to use a qualified tax professional.
If you’re looking for a tax pro to take care of your 2021 taxes, give us a shout! Our veteran tax experts can answer your toughest tax questions and ensure your return is accurate and compliant.
We’ll also make sure you’re getting the most out of your deductions and any available tax credits, so you can keep more of your hard-earned money.
Sign up for a one-on-one strategy session with a Shared Economy Tax pro now and enjoy a stress-free filing deadline.