Depending on your source of income, taxes can range from annoying to downright painful. Contract workers and business owners must dedicate substantial time to preparation each and every tax season, while others are busy dealing with their own unique tax struggles.
Preparing in advance can help mitigate some of the stress brought on by tax season. However, few people know how to prepare themselves for this annual event. Whether you’re a contractor, business owner, or an employee, here are a few ways you can ready yourself for tax season.
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Organize Your Documents
Most experts strongly recommend that you set aside a folder or drawer for your tax documents. If you’re an employee with a W-2, you will most likely only need the space for one or two W-2s. If you’re a business owner or contract worker, you may have much more to organize.
Businesses and contract workers often have receipts and other documentation of tax deductible expenses, proof of income, and other such items. It is important that you organize these and make them readily accessible for next tax season. This can help speed the process along.
Contemplate Your Filing Status and Deductions
As your life changes, your tax status also finds itself in a state of flux. Children, marriage, divorce, buying a home, education, and many other things can affect your status. If you have a spouse, it is always good to review your filing status and deductions. Of course, the confusing realm of tax deductions can be a little hazy and is best navigated with the help of a tax specialist.
Know How and When to File an Extension
Tax extensions are a fairly simple and useful tool when things go wrong. If someone is withholding or has lost essential tax documents, you may need to file an extension in order to get your information together. Always be armed with the knowledge of how and when you should file an extension in the event of difficulty.
Find a Tax Specialist, Particularly if You’re a Contractor or Business Owner
Taxes for business owners and contractors are many times more confusing than using TurboTax to file a W-2. Between deductions, quarterlies, and other such nonsense, you can very easily file your taxes incorrectly. Money spent on a tax specialist will save you money, pain, and frustration in the long run. Never attempt to file complicated taxes on your own.
Keep Careful Records Throughout the Year
If you’re a business owner or even just a parent looking to save on college, it is critical that you keep a careful record of your tax-related expenditures. Organize these into the previously mentioned space for tax documents and maintain this system throughout the year. If you start preparing on day one, tax season itself will be a breeze.
Though nothing can fully reduce the painstaking time of year that is tax season, there are ways you can prepare yourself to deal with it more quickly and smoothly. Gathering, organizing, and consulting far in advance allows you to arm yourself with the necessary knowledge and documents before the deadline strikes and you are forced to file an extension. Of course, it’s also smart to know how to file for an extension should you ever need more time to get things in order.