UNITED STATES─Well that time of year has transpired America. For some we love, for others we dread it. No I’m not referring to Winter, I’m referring to tax season. For some Americans they will have to pay Uncle Sam, for others they’ll be receiving a refund check in the mail. With that said, it’s important to prepare in advance. The IRS is already warning people to be careful as to who they allow to do their taxes. Don’t just allow someone you do not trust to do your taxes because at the end of the day you are signing off on that paperwork.
So what does that mean? If you don’t trust the person, and you’re questioning if they’re a certified tax professional it might not be a bad idea to utilize someone else. That’s just tip #1. Of course the obvious one is don’t try to cut corners with your taxes. Of course you want to ensure you get all the tax credits and exemptions owed to you, but don’t lie about things that are NOT accurate. When you do so you place yourself in a situation where you might find yourself being audited or having to owe the IRS and that is the last thing you want people.
Itemization. Some people do it, some do not. If you are indeed itemizing, you better have those receipts to back up each item that you are listing or claiming on your taxes. Why? If you just happen to be audited by the IRS you have all your receipts and paperwork in place to backup what you have claimed. Before we talk about paying the government or what to do with that refund check you receive, perhaps one of the most important things to do is to review your tax return.
Some people just sign off on their return without reviewing what has been filed or what information is detailed in their tax return. Big mistake. Review your return in its entirety to ensure you catch any mistakes or discrepancies. Remember you signed it, so if anything wrong transpires it’s on you.
Now for the portion that some Americans hate: paying the IRS! You should always prepare in advance if you are self-employed or an independent contractor. Put money away throughout the year towards your taxes so you are not surprised by a hefty tax bill at the end of the year. The one thing you never want to do is not file your taxes especially if you grossed taxable income. It will eventually catch up with you. If you need an extension on your taxes or need to arrange a payment plan, contact the IRS.
It’s better to do something than do nothing at all and be slammed with a massive tax bill that causes stress and panic in your life. If you plan ahead, you won’t find yourself in a dicey pickle people. Now, let’s turn to those who might be getting a refund from Uncle Sam. What you do with that refund is completely up to you? However, don’t blow it all in one place if you don’t have to. Why?
A tax refund is like a savings people. It’s you getting money back that you paid throughout the year. Yes, there are plenty of people arguing you should never get a refund, you should break even, but there are always people who overpay the government and because of that they should get their money back. You might want to take a portion and put it into savings, take a family vacation, money for a car, down payment on a house, or what many people I know do: pay off debt. Yes, debt is the thing that haunts so many of us.
Tackle the debt in a smart way. Pay off the small credit cards first that might have a high interest rate. Why? Once paid off that money you would have used to pay those bills, you can double up the payment on another bill that may be hefty on the interest rate. You might take the opposite approach where you want to put a debt in those credit cards that have a high balance. Whatever you choose, do it in a way that you leave yourself some money left over for a rainy day.
You never know when something unexpected might arise and when it does you are placed in a situation where you might need to dabble in those funds. It’s much smarter to have those funds than to not have them at all. Rather you are getting a return or paying a bill, tax season can be stressful, but this is a reminder, it doesn’t have to be if you plan ahead.
Written By Zoe Mitchell