Tax season is just beginning for most taxpayers. But whether you want to file as soon as you can to get your refund back or just want to get a head start on getting your return ready, finding ways to make your tax preparation simpler and faster can be a godsend. Below, you'll find some ideas you can use to make sure you get your taxes done as efficiently as possible without making unnecessary mistakes.
Spring for electronic tax software
Tax preparation software might not seem like it's worth the expense, especially if you have a relatively simple return. But using popular programs to help you prepare your tax return can pay dividends in several ways.
First, tax prep software does all your arithmetic for you. The IRS has said that one of the most common reasons why returns get audited and refunds get held up is that people make simple math mistakes on their return. When you use a tax program, the only danger is entering numbers incorrectly, and many programs allow direct import of tax statements to reduce the risk of data-entry errors as well.
Second, many tax programs offer electronic filing free of charge to those who pay for the software. That alone can shave weeks off your refund time and ensure that the IRS receives your return promptly.
Finally, tax programs know about deductions, credits, and other tax breaks that might otherwise escape your notice. Based on the information you input, good tax prep software can discover ways to reduce your tax bill, and in many situations, it can end up paying for itself.
Be patient about filing
Many taxpayers file their returns as soon as they possibly can. That gets the clock started on a refund, but it can backfire if you fail to take all of your tax information into account.
Employers, financial institutions, and others who have to report income paid to you have deadlines that they're supposed to meet, and so theoretically, you should be able to rely on getting tax forms on a timely basis. In reality, though, many institutions miss deadlines, and others have to make corrections to previously filed information returns. If you file based on incorrect information, then you'll end up having to do an amended return, and that can add even more time to the process.
Before you file, make sure you have all the forms you expect, and see if they seem to have the information you're used to getting. Even then, it might make sense to hold off filing until later -- especially if you aren't getting a refund and therefore have no reason to be in a hurry to file.
Be tax smart with your investments
Investors often find that their investments create the most tax headaches. Between reporting interest, dividends, capital gains, and other types of income, investors can set themselves up for tax pain if they aren't smart about structuring their finances correctly.
The best way to simplify your taxes is to use tax-deferred retirement accounts effectively. If you buy and sell investments often, then doing so in an IRA keeps you from having to report every single move you make in your portfolio. Keeping buy-and-hold investments in regular taxable accounts minimizes the tax burden they have, as well as any tax-reporting requirements along the way.
Beyond that, just being mindful of tax consequences when you invest can make tax time easier. Things like using the specific identification to choose tax lots when you sell shares, avoiding investments that produce complicated tax reporting forms like Schedule K-1s, or even just trading less often can go a long way toward reducing your tax preparation burden.
Preparing your taxes can be a big hassle. But following these simple tips can make tax season go a lot more smoothly.