AH!!! It’s that time of the year again when we need to start filing our taxes. Instead of procrastinating or stressing about the hassles of tax time, we put together a few tips that you may want to consider to keep things as easy and as painless as possible this year. They are designed to help you stay on top of your game during tax time and to ensure that you don’t overpay your taxes.
1.Don’t Throw Away Your Records: By now you should start to receive your 2013 tax documents from W-2s to 1099s to name a few. For any of these tax documents, please be sure to save them and provide a copy to your CPA or tax preparer. Making sure that all of the correct info is reflected on your tax returns can definitely help to minimize chances of unwanted IRS questions. If you receive something and you are unsure whether it needs to be sent to your CPA – send it to them anyways! Better safe than sorry.
2.Organize & Review Your Financials: Whether you do your own bookkeeping or if you have someone else do it, be sure to review your numbers before you send them off to your tax preparers. You don’t need to look at every transaction that happened last year, but you do want to look at the big stuff. For example, does the net profit look correct? If you sold a property, does the gain or loss seem accurate? Make sure your books are correct before you sent them to your CPA to avoid confusion and re-work costs.
3.Real Estate by Property: If you have rental real estate or if you are in the fix and flip business, your income statement needs to be shown on a property by property basis. If you identify any major issues with your income statement or balance sheet, be sure to contact your bookkeeper or your CPA as early as possible to determine the most time and cost efficient way to make the appropriate corrections.
4.Don’t Forget the Balance Sheet: One of the financial statements that a lot of investors forget to look at is the balance sheet. What is a balance sheet? Simply put, it is a financial statement that shows a list of all of your assets and liabilities as of year-end. Not everyone needs to have a balance sheet, but keep in mind that if you operate with a legal entity, chances are good that you need to have a balance sheet reported on the tax return. So what you want to do now is print your balance sheet from QuickBooks and review it with your bookkeeper to see if the numbers make sense. Is the correct cash balance showing? Is the mortgage balance correct? If not, now is the time to meet with your bookkeeper to get that cleaned-up before tax time.
5.Know What to Bring: Whether you drop off, mail, or fax your documents to your tax preparer, make sure that you know what they need. Now is the time to ask for a Checklist or Organizer so that you can be prepared. Taxes change every year and so do credits, so make sure that you review the information request carefully to ensure that nothing is missed.
6.Make a List of Questions Beforehand: Write down a list of questions for your CPA before your meeting. If you have questions related to gathering documents, ask these questions early to save yourself time. For example, your CPA may not need to see each and every one of you receipts. Knowing what is needed and what is not can help to save you time and make the process more efficient.
7.Legal Entities: Did you form any new entities last year? Dissolve any entities? Or maybe change ownership in your entities? These are some major changes that can have a significant impact on how your taxes are filed so be sure to let your CPA know ahead of time regarding any entity-related changes.
8.Real Estate: If you bought or sold properties last year, be sure to let your CPA know. To ensure that all of your costs are denoted correctly, be sure to send in copies of the final HUDs so that your preparer can capture all of your write-offs.
9.Major Life Changes: Marriage, divorce, babies, inheritances, and death are examples of major life changes. If you haven’t already notified your CPA, be sure to let them know of any major life changes before they start working on your taxes so that they can help you file in the most beneficial way.
Tax time can be stressful for a lot of people, but with these simple tips you can get ahead of the game and file your taxes with confidence this year!
Photo: agrilifetoday
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
FAQs
Stress-Relieving Tips
To avoid last-minute stress, file early and break up the job into little pieces, Mellan suggests. Do your taxes while listening to music or whatever else makes you feel relaxed. For filers with math anxiety, Mellan recommends hiring a preparer or investing in tax software.
How to maximize tax refunds? ›
How to boost your tax refund (or lower your tax bill)
- Work with a tax professional. ...
- Claim all eligible tax credits and deductions. ...
- Don't overlook deductible expenses. ...
- Choose the right filing status. ...
- Maximize your contributions. ...
- Adjust your W-4. ...
- File at the right time.
Executors can claim rights due to the deceased person and are liable to cover unpaid taxes. Generally, the IRS or relevant tax authority can only claim unpaid taxes through the deceased's estate. If the person dies without assets, the taxes may go unpaid.
What is the tax status for a surviving spouse? ›
Taxpayers who do not remarry in the year their spouse dies can file jointly with the deceased spouse. For the two years following the year of death, the surviving spouse may be able to use the Qualifying Widow(er) filing status.
What are some ways you can make tax season a little easier? ›
10 Ways to Help Make Tax Season a Little Easier
- Get Organized: ...
- Go Digital: ...
- Adjust Your Withholdings: ...
- Keep Track of Expenses for Deductions: ...
- Pay Attention to Tax Law Changes: ...
- Ensure Accurate Tax Withholdings: ...
- Contribute to Retirement: ...
- Minimize Trading in Taxable Accounts:
Steps you can take now to make tax filing easier
- View your tax owed, payments, and payment plans.
- Make payments and apply for payment plans.
- Access your tax records.
- Sign power of attorney authorizations electronically from your tax professional.
- Manage your communication preferences from the IRS.
Requirements to receive up to $7,000 for the Earned Income Tax Credit refund (EITC)
- Have worked and earned income under $63,398.
- Have investment income below $11,000 in the tax year 2023.
- Have a valid Social Security number by the due date of your 2023 return (including extensions)
How do I get a 10,000 tax refund? You could end up with a $10,000 tax refund if you've paid significantly more tax payments than you owe at the end of the year.
How are people getting 30k back on taxes? ›
The Department of Community Services and Development encourages Californians earning under $30,000 a year to file their taxes to claim the California Earned Income Tax Credit (CalEITC), a cash-back tax credit, and receive a larger tax refund.
What debts are forgiven at death? ›
Upon your death, unsecured debts such as credit card debt, personal loans and medical debt are typically discharged or covered by the estate. They don't pass to surviving family members. Federal student loans and most Parent PLUS loans are also discharged upon the borrower's death.
In simple terms, the widow's penalty refers to a situation where a surviving spouse may experience a reduction in their overall income or financial benefits, but an increase in taxes, after their partner passes away.
Are funeral expenses tax deductible? ›
Individual taxpayers cannot deduct funeral expenses on their tax return. While the IRS allows deductions for medical expenses, funeral costs are not included. Qualified medical expenses must be used to prevent or treat a medical illness or condition.
What is the most advantageous filing status for a widow? ›
The tax rates for a Qualifying Surviving Spouse are the same as for couples filing a joint return and are lower than the tax rates for a Head of Household. So if you are eligible to use the Qualifying Surviving Spouse status, you should do so.
Is there a tax credit for death of spouse? ›
The Bottom Line. The qualifying widow(er) tax filing status allows for tax breaks to a widow(er) for two years following the death of a spouse. You have to remain single and you have to have a dependent living at home to use this status. And you can't use it in the year in which your spouse died.
How many years can I file as a widow? ›
You can file taxes as a qualified widow(er) for the year your spouse died, as well as two years following their death. So, depending on the timing of when the spouse passed during the year, this time frame could technically be three calendar years.
Why is tax season so stressful? ›
Tensions can run high from the pressure of getting the forms filed on time or coming up with the funds to pay your (hopefully not too big) tax bill. But you owe it to yourself to keep your stress under control as much as possible.
Why is doing your taxes so stressful? ›
As with most fear, it comes from the unknown. Because the taxes are being sent off to the government, a massive institution that has the power to oversee, audit, and take action against individuals for filing incorrect tax forms, the anxiety can seem quite real.
Why do taxes stress me out? ›
“When we ask people what it is that is causing stress in their life, it's about money and uncertainty,” said Vaile Wright, the group's psychologist and director of research and special projects. Our body responds to stressful life events, like tax day, through a series of biological responses.
Why is doing taxes stressful? ›
It can also bring intense feelings of stress or anxiety about dealing with finances. Financial stress during tax season can manifest in different ways, whether that's procrastinating on your tax return until the last minute or experiencing intense stress about filing incorrectly.
