April is a lovely month. Spring has sprung, trees and flowers are blooming, and we feel energized by the warmer weather. When he penned “April is the cruelest month,” the poet T.S. Eliot wasn’t referring to the season for filing taxes, but he might as well have been since that’s how most of us feel this time of year.
I feel particularly virtuous this year, because I got my taxes done early. I’m normally a “last-minute Lucy” when it comes to taxes, and that usually means filing an extension. Typically, each year we owe money when we file our tax returns. The joys of self-employment! Owing money at tax time is also the result of someone who loathes overpaying taxes along the way. Of course, when I procrastinate, don’t get the taxes done, and file an extension, it just prolongs the anticipation and agony of the final bill — not to mention the pain of penalties for paying late.
This year I vowed to dismiss my usual procrastination around filing taxes and get it done early. Another thing that helped was the fact I did a better job of estimating my tax over the past year and paid my quarterly payments. While I certainly wouldn’t say that filing my taxes was fun, I determined some ways to make the task far simpler to accomplish.
Whether you prepare your own taxes or pay someone else to do this for you, here are ways to make tax preparation less onerous next spring.
Keep a Tax File
My filing system is ridiculously simple. I have a folder called “To File” (how original, right?), and as I’m processing bills and documents, I put everything I may need to keep for some length of time into that file. A few times a year, I flip through the file and remove what I don’t need anymore. I shred the discarded papers and the rest remain in the file.
I usually wait until January to do a final sort of the file, where I pull out everything related to tax preparation. I create a folder labeled “<Year> Taxes” and shove them all into this one file. I’m not inclined to have all my various tax categories (charitable, medical, etc.) in separate files. Elaborate filing systems are lovely, and I admire them from a distance. But we do not cohabitate.
This past year, I made a useful change to my system. Immediately after doing my taxes last October (ahem, filing an extension), I made a folder for the current year tax documents. When I did my regular purging of the To File folder, I moved tax-related items to the tax folder. This kept the To File folder leaner all year and made sorting each quarter slightly less painful.
Keep a List of Charitable Donations
If part of your financial life includes charitable donations, keep a running list of your contributions as the year goes along. We give to numerous organizations, so it is easier for me to keep a spreadsheet and enter the amount and date of the contributions we make. Not only does this help with my organization when I’m ready to file my taxes, it also prevents me from forgetting to make a contribution to a cherished organization. When tax time rolls around, I compare the list to the acknowledgment letters to verify proof of all the donations.
While this may sound like more work, it saves time in the long-run once you establish the routine. A simple, hand-written list is also sufficient.
Check in on Your Withholding
If you owed a substantial amount at tax time, consider adjusting your withholding if you are an employee. If you are self-employed, increase your quarterly estimated payments, which will ease the pain next year when it’s time for tax preparation.
If your income is highly irregular, mark your calendar for August and check in on your income. Compare the year-to-date income to the prior year and determine if you have paid in the same amount of tax as the previous year. Checking in August gives you the opportunity to make two more quarterly payments (September and January) before tax time rolls around again.
Evaluate Your Deductions
Could you have better organized your deductions last year? Could you improve how you track mileage, charitable deductions, and other expenses? Consider where there’s room for improvement and create a better system to keep track of your deductions.
Spending a bit of time now will save you time AND money next year when it’s tax season.
Gamify Your Taxes
Sounds silly, right? I dread doing our taxes, because I know it requires an entire day. That makes me cranky just thinking about it! This year, I decided I was going to take the bull by the horns. My goal was to have all my tax preparation done in less than six hours. Honestly, I wasn’t sure how long taxes had taken me in the past, largely because I’ve always tended to drag the exercise out all day, giving myself (out of self-pity) lots of little breaks. But this year was to be different. Focused attention and rapid (but accurate) completion were my goals.
I admit I’m pretty much a sucker for a challenge, even if it is self-imposed. The start time was notated, and I set to work getting this year’s tax software loaded into my computer. I worked steadily with minimal breaks, and I got the whole project done in five hours. It took another thirty minutes or so the next day to review it, print it, and get the check written. (The last part might have been even more expedited, but the sobbing slowed me down a bit.)
Maybe your tax season isn’t as painful as mine. But if it is, and you spend a bit of time now, you can make next year’s tax preparation more efficient. Try to “gamify” it and it might even be fun!
How do you get through tax season? Is it a breeze or an ordeal? Share your tips.