It is said Benjamin Franklin once wrote nothing was certain but death and taxes — and it seems he was right. As we stare down yet another April 15, many procrastinators (guilty!) find themselves scrambling at the last minute to organize their materials before sitting in front of an accountant, or filing themselves.
Plus, with a new tax law in effect, you might be in a position to rethink your deductions, which can change the game in how you prepare. Though the near doubling of the standard deduction means more people will likely opt for the standard deduction, many will still have to go through the trouble of itemizing to see which option offers the greater benefit, says Andrea Coombes, a tax specialist, investing and retirement writer who contributes to NerdWallet.
The exercise of compiling all of your yearly expenses can be overwhelming, and the urge to stick your head in the sand come tax time can be strong and real. But Coombes says an attitude adjustment — and a little organization — can help make the process easier. “One way to think about doing your taxes is as an annual check-up on your finances. You have to delve into your financial situation from a year ago, and that can really help you plan for the future,” says Coombes.
Is there anything can we still do this year to prevent having to cram for tax prep and make the whole process a little easier to tackle? Here are six things to consider:
1. Target deductions in advance
If you’re considering itemizing your deductions, Coombes advises taking a close look at a blank 1040 and a blank schedule A to determine which expenses are eligible for deduction. “Line entries for several categories of deductions might jog your memory about what your deductible expenses are for the year,” she says.
One way to think about doing your taxes is as an annual check-up on your finances.
Andrea Coombes, tax specialist
2. Adopt a storage system that works for you
April Walker, lead manager for tax practice and ethics for the American Institute of Certified Public Accountants (AICPA), says the paperwork storage/organization part of tax prep is a highly personal decision — you have to land on a system that works best for you. For some (like Coombes), this entails storing your receipts in a drawer or in a filing cabinet, in one easily accessible location, until you’re ready to tackle them.
Disorganization can be costly come tax time. “You might not be able to find that receipt for your childcare payment, and then you decide not to declare the benefit and you lose out on a valuable tax break,” Coombes says.
However you prepare, just be sure to do your math before submitting your paperwork: If you use a CPA to prepare your taxes, Walker warns they might charge more for having to deal with your receipts.
3. Budget your time
Allot enough time to review credit card statements, PayPal and debit card statements to see if there are deductible expenses you might have forgotten about. And, if you drive for work, be sure to track your miles, says Coombes.
4. Ask your accountant about more than taxes
To most people, meeting with your CPA is all about praying for a refund — or at least the tax you owe is minimal. But, Walker says, keeping the conversation focused on taxes is an overlooked opportunity to address your overall financial well-being. “A CPA is able to give ideas for the rest of your life,” she says. “You’re also going to want to talk about other things, like retirement, or saving for college, or cash flow and budgeting. To make the most of your appointment (and your CPA’s expertise), prepare a list of questions to ask your CPA about ways to improve your financial wellbeing before your appointment.
5. Revisit your withholding
Once you’re done with your taxes, Coombes says it’s important to reconsider your withholding tax status and make any adjustments you deem necessary. “Only 16 percent of people changed their withholding as a result of the big new tax law. This can lead to surprises at tax time. My advice is to shoot for a small refund. If you’re getting a big refund, that’s money you could’ve had in your paycheck all year long that could’ve gone into your 401K or to pay down debt,” says Coombes.
6. Take advantage of last-minute deduction opportunities
All is not lost: There are still some things you can still do between now and April 15 to affect your 2018 returns, sock away cash for retirement through an IRA contribution, or, if you’re self-employed, a SEP contribution instead of listing it as taxable income, says Walker.
MORE TAX TIPS
- How the 2018 tax law will affect your refund
- 11 smart ways to spend your tax refund, according to personal finance experts
- Ask a tax expert: Is it better to file your taxes jointly or separately?
- Freelancing? Here's how to prepare for tax season all year long