Files in folder

Tips to a Painless Tax Season

Whether you file your taxes on your own, or use a CPA, here are some tips to make the experience a little less awful:

1.     Collect Your Documents

Tax forms start coming in the middle of January and continue through February and into March. Every year we see more tax documents coming through e-mail, so be sure to check your inbox and your spam folder.  Create a physical file folder for the physical documents you receive.  Clearly label it and put it in a safe and secure place.  For electronic tax forms, save those to your computer hard drive, or even better, to a trusted cloud storage provider like Drobox.  It’s also a good idea to scan those physical documents and store them in your electronic folder.

2.     It’s All in the Name

W2, 1099, 1098, K1, etc.  There are so many different tax forms it’s easy for a person to become overwhelmed and confused by the documents that begin flowing in January.  One way to deal with the onslaught of documents is to have a standard naming convention for files you save to your computer.  Around our office we like to start our document names with the tax year, then follow that up with the form designation, then where the form came from, and finally with the client’s name.  So, Bob Smith’s 2019 1099DIV from Chase will be saved on our servers as:

2019_1099DIV_Chase_SmithBob

This helps us identify some important information about the file without even opening it up, which is a real time saver.   My daughter would call this a #lifehack!

3.     To Itemize or Not to Itemize, That is the Question

With the Tax Cuts and Jobs Act (TCJA), we’ve seen an increase in taxpayers using the increased standard deduction instead of itemizing.  However, taxpayers can still itemize if the itemized deduction is higher than the standard.  How do you know which is higher?  Gather those documents and add up the total itemized deductions and compare them to the standard deduction for your filing status.  Here’s the 2019 standard deduction amounts:

Filing Status 2019 Standard Deduction
Single $12,200
Married, Filing Jointly $24,400
Married, Filing Separately $12,200
Head of Household $18,350

4.     Time is Everything

Filing taxes takes a lot of time and effort and can be a painful activity.  Getting your documents organized and filing your taxes as soon as possible gets the whole miserable experience over with.  If you’re like millions of Americans and file an extension to allow you to procrastinate, all you’ve really done is spread the pain over most of the year.  Around here, we hate extensions.  We find clients enjoy Summer vacations by the pool much more if they don’t have that nagging feeling that they still need to do their taxes.  The sooner you get your taxes finished and filed, the sooner you can get back to enjoying your life.

5.     Hire a Tax Specialist

If you hire a CPA to do your taxes, their first job is to ensure you are paying the correct amount of tax, which is the lowest amount of tax you are legally responsible to pay.  However, CPA’s help you in a variety of other ways.  CPAs can help you get organized and find those missing deductions.  CPAs help you determine the best options to take advantage of to lower your tax liability.  And maybe most importantly, CPAs allow you to put the burden of filing your taxes onto someone else, which may be the biggest benefit of all.

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