How to Take a Proactive Approach to Your Taxes

May 31st, 2013 by

Tax season may be over, but that doesn’t mean it’s time to hide from your finances for another year. If you’ve rushed through the tax process every year because you left it until the last minute, these tips could help you stay on top of your taxes. When you plan ahead, you may be better able to avoid a nasty tax-related surprise. Implement these tips today to make sure you’re ready for taxes next year:

Process your paperwork

One of the biggest missteps people face when it comes to filing taxes is not keeping track of their receipts. Knowing what you spent money on, which charities you contributed to and how much, and which dinners could be considered business expenses is critical to calculating your taxes easily. You can come up with your own system, the trick is to make sure that you use it consistently. Some people prefer to shove old receipts in a shoebox and forget about them, while others would rather enter them into a spreadsheet once a week or every month. It doesn’t matter which system you pick, as long as you stick with it.

Avoid a filing fiasco

If you’re self-employed or suspect you might owe money for taxes next year, you may wish to review your needs right now in order to ensure that you meet all the rules. For example, you may face an underpayment penalty if you don’t pay at least 90% of what you owe before tax time. If you start preparing now, you may be able to make quarterly payments in order to spare yourself a larger tax burden at tax time next year.

Check your paycheck

Even if you choose not to change it, it could be worth it for you to check on your deductions every year. You can proactively change your withholding by speaking with your employer. For example, if you get a large refund every year, you may wish to switch your deductions to put more of that money back into your paycheck. If you think you may owe more money than you’re currently having deducted, you could also change your withholding to deduct more.

Procure a tax professional

The best time to get a tax professional on your side is in advance of tax season. While yes, professional tax help can still be procured in late March or early April, you’re better off discussing your needs with professionals before they enter busy tax season. Plus, if you bring a pro on board early, you may be able to get tax planning help that could potentially reduce the amount you owe.

Review your returns

Do you know where your tax returns are? If not, take the time to locate them and store them in a safe location. You’ll need them to file next year, so ensure that you have all the necessary documents stored in a safe place.

Don’t turn tax time into a nightmare – planning ahead could significantly reduce your stress next April. Try out these tips if you want next year’s taxes to be smooth sailing.