“An optimist is someone who sets aside two hours to do his income tax return.” — Unknown
A lot of the anxiety around taxes comes from people feeling overwhelmed with tax preparation. It doesn’t have to be that way. A few simple steps can help you get your taxes done with less stress and more peace of mind.
Tax Preparation the Easy Way
Save in One Spot.
All year long, before you do your taxes, have one place in your home where you can put stuff that you might need when you prepare your taxes. It could be afile, drawer, or box. That way, when you go to prepare your taxes, you have all the information together.
Use a Tax Preparation Checklist.
Whether you use tax preparation software or a tax preparer, the software or preparer should provide you with a checklist. There are also tax preparation checklists online. Use a checklist to see if you have all the documents you need to prepare your taxes. A checklist can help you remember a document you forgot.
Organize Your Documents.
Once you have gathered all the documents you will need to prepare your taxes, put similar documents together. For example, if you and your spouse work, put your W2s in a pile and paperclip them together.
At this point, you are ready to prepare your taxes.
Tax Preparer or Tax Software?
Next, you can decide whether to prepare your taxes using tax software or a tax preparer (such as a tax attorney).
While you could prepare your taxes on paper, this can be extremely frustrating and time consuming. Using paper forms may be fine for kids with a part-time job, since they will probably use a “short form” and their taxes are simple. For most others, the benefit of software or a tax preparer will far outweigh the costs.
1. Tax Software
Tax software is cheap. Tax software will ask you a ton of questions, calculate numbers for you, and often allow you to print or e-file your taxes. But tax software has some problems.
The first problem with tax software comes when the tax software asks you questions and you don’t know the answer. Although the tax software often has some additional information on the topic, and information can be found online, you may have trouble knowing how to apply the information to your particular situation.
The second problem with tax software is human errors. You may miss a deduction or credit if you don’t realize that you qualify for it. Although the tax software will ask you about various deductions and credits, you may not know whether you qualify and you may skip large categories without realizing that you qualify for a specific deduction or credit.
If you have a simple tax situation or are familiar with tax laws applicable to you, you are probably fine using tax software. But those with more complex situations who are not familiar with tax laws may find the cost of hiring a tax preparer is worth ensuring that the taxes are done properly and proper credits and deductions are counted.
If you want to use tax software, you may qualify for the IRS free tax software. In the past, I have used Turbo Tax and been happy with it.
2. Tax Preparer
The cost of a tax preparer is usually $100-500, depending on the complexity of your situation and the qualifications of the tax preparer. But the benefit is the amount you save on your taxes.
Another benefit that a tax preparer offers over software is that you can ask the tax preparer questions, the tax preparer can understand your entire tax situation, and the tax preparer can analyze your situation for tax credits and deductions that you deserve.
Using a tax preparer provides peace of mind, may improve the accuracy of your tax return, may save you a significant amount on your tax bill (if you would have otherwise missed something), and can give you someone you can call throughout the year with tax questions.
As a tax attorney, I answer tax questions throughout the year. I also follow the latest changes in the tax code. At the end of the year, I meet with clients, talk to them about their financial situation and tax records, and then prepare their taxes. Year after year, I get to know their financial situation and assist them with tax planning, tax preparation, and other legal issues that arise.
Finish Your Taxes
Once you have selected tax software or a tax preparer, the next step is scheduling the tax preparation. If you meet with a tax preparer or tax attorney, plan to spend about an hour. If you do your own taxes on software, plan to spend a few hours or a day doing your taxes.
Bonus Tax Tips.
Here are a couple additional tips that will help remove the stress from your tax preparation process:
- Start Early. By January 31, you should have all the information you need to do your taxes. If you start early and have problems, you will have time to resolve the problems before the deadline. If you start working on your taxes right before the filing deadline, your anxiety will be higher and you may not have time to get help if you encounter a problem or question.
- Get Help.If you have questions, you can call the IRS (but you may wait on hold for awhile), the company that sold you the tax software (but you might pay a fee for this), or a local tax attorney or preparer.
I hope these tips bring less anxiety and frustration to your tax season.
Author: Aaron Hall is a tax attorney licensed in Minnesota, and admitted to practice in state and federal court. As a tax lawyer, he provides tax strategy planning and advice to small business owners and individuals throughout the year, and prepares taxes during tax season. His service area includes Minneapolis, St. Paul, the MN Twin Cities area, and greater Minnesota.