Prepare for Tax Season in Four Easy Steps
I have a complaint. A really big complaint, actually. Tax season should not be right after the holidays. We go from wearing an elf hat and handing out holiday cheer on a budget, to digging through stacks of paperwork to find a receipt or tax form we swore we’d keep up with this year. Maybe that’s just me?
Perhaps you are the most organized person on the planet and tax season is as easy as walking into your neighborhood tax preparer’s office and handing over a lovely file folder you kept up with all year long (I imagine you wearing white gloves and a cape because you’re a magician my friend). Not I. For me, tax season is a little stressful and filled with lots of moments where I sit at my desk like a cartoon character with question marks dancing above my head. Are IRS forms1 even written in human or perhaps elvish? Just because I wear an elf hat during the holidays does not mean I can speak the language.
However, I am a woman with a plan. I also have the drive to improve myself year over year. In 2022, my tax filing went smoothly because I prepared (really! I did!), and in 2023 when I file taxes for 2022? I’m going to crush it. How? By preparing, even more thoroughly, beforehand.
If you’re more like me and you need a little inspiration as you mentally prepare for tax season, put the following items on your to do list over the next few weeks. You’ll be prepped and ready to go when tax day is no longer looming upon us. Cue some Lord of the Rings dramatic music, let’s stay on theme for fun
As we navigate the next few steps, we will also dive into some of my personal tax preparation failures. Consider these tales from the tax-prepping-crypt if you will. Tales of horror and mistakes that you can avoid! Heed my advice: do not do as I have done, do better.
Step By Step, Make a Plan!
Before you start prepping documents and choosing your tax preparer, keep in mind you will have until April 15th (as usual) to file your tax return for 2022. You can file an extension if you need to, and individuals have a few extra days. The IRS begins accepting returns at the end of January3, so make it a goal to prep your documents and your 2022 tax plan as quickly as possible this year!
Step One: Choose Your Fighter
DIY, Hire a CPA, or Choose a Trusted Tax Prep Company DIY is a passion of mine, but not when it comes to taxes. I applaud everyone who is able to navigate the maze of taxes using an online service at home in their pajamas. I have to talk to tax professionals for their help each year because I would classify myself as something less than a novice. My head spins, my eyes glaze over, and I just do not understand what’s going on when it comes to filing taxes. We can’t be good at everything, though, it wouldn’t be fair to everyone else, right? If you’re like me, your first step is to choose a tax preparer.5
You can work with a Certified Public Accountant (CPA), an enrolled tax agent, someone with a certification, or someone without a tax certification. You want someone, however, who has a reputable business and can provide reviews of their services. The worst thing is working with someone who ends up not knowing what they’re doing because it can cost you time and money. Story time! I once hired a CPA to do my taxes who disappeared in the middle of the tax filing process. I’m not kidding. The guy literally could not be found. A different year, I worked with a tax preparer who told me to throw any letters I received from the IRS in the trash because they were empty threats. I am not making this up. That’s horrible advice, by the way. Another CPA I hired, told me he “just plain forgot about me” after I received a notice that forms for my business hadn’t been filed. Don’t be like me. Don’t find your tax preparers and CPAs on social media through someone you met at a happy hour or in the yellow pages. Yes, the yellow pages still exist. I’m ashamed of these stories, but perhaps you’ll avoid my mistakes and make it worth it. File your taxes on time, work with people who don’t disappear, and never throw things from the IRS in the trash. That’s the moral of those stories.
Research tax preparers in your area and choose someone with a track record, happy client testimonies, and certifications as well as experience working with people in your situation. Working with a tax preparation company is a great option because you can work with a brand that has history which you can typically trust means quality service and timely filing of your documents. You can verify6 whether or not someone is an enrolled tax preparation agent through the IRS if you choose to work with an individual rather than a larger, well-known brand.
Step Two: Make an Appointment
No matter who you choose to complete your taxes, you’ll need to make an appointment. Waiting until the last minute to book an appointment with your tax preparer is a recipe for disaster in the form of a stress headache or even IRS penalties for being late. shudder
The best tax preparers fill their calendars early, so jump on it. Bonus: Setting your appointment early, perhaps before returns are even accepted, keeps you accountable by setting a deadline for getting things together and ready to go.
Step Three: Prepare Your Paperwork
The best way to keep up with your paperwork throughout the year is to designate a special spot in your home for a file folder filled with documents that you collect prior to tax day. You might need a few forms like a W2 and your identification. However, if you own a small business, have investments, own a home, or have a special tax situation you will likely have more documents that you need4 to provide. If you’re looking for a detailed list of documents, download a tax form checklist or speak to your tax preparer about your situation prior to going in for your appointment to file.
At minimum you’ll need the following information if applicable to your situation:
⦁ Identification for you, your spouse, and dependents.
⦁ A copy of your latest tax return. I always have two years returns on hand just to be safe.
⦁ Income information: if you were paid during the year, you’ll need proof of that income in the form of an official tax form.
⦁ Self-employed? You’ll need business records, organized deductions, and payroll information.
⦁ Receive any tax credits this year? Bring your records. You’ll also need information about any estimated tax payments you made.
⦁ Patience isn’t exactly a form, but I suggest you bring that and a nice bottle of water or soda to your appointment as well.
A few important notes: If you own a business, you’ll want to hire a bookkeeper to help you keep up with things throughout the year. Working through all of your documents in a short amount of time isn’t fun and can result in mistakes being made that could be costly.
Likewise if you’re self-employed, you’ll need records of your earnings. If you’re audited, you have to prove where every dollar came from, so keep this in mind. And yes, you are supposed to claim cash payments. It’s best to stick these in the bank so you can keep track. Income from investments count as well. Simply put, if you earned it? You need to claim it. There’s nothing more intimidating than the words, “You’re being audited by the IRS” so do the right thing and claim all of your income.
Still not sure which documents you need? You can find a more comprehensive and detailed list of documents you might need here7. However, the most important thing you’ll need to bring to your tax appointment is your communication skillset. Speak honestly and openly with your tax preparer about your situation and the events of the past year. If something is missing, your tax preparer will be able to advise you and direct you to the proper documents.
Step Four: Refund Ready!
If you’re one of the many people expecting a refund this year, make sure you prepare a plan for spending the funds you receive. Consider perhaps taking care of some of the financial items on your to-do list that extra funds can help you accomplish!
Do you have a debt to pay2? Perhaps a credit card that got a little out of hand or a loan that you’d like to pay off early? Using your tax refund to pay down debt or contribute to your rainy day funds is an excellent, and super #adulting choice. Exciting? Not really, but making a decision to spend your refund prior to receiving it will help you make a decision that you feel great about all year long.
If you receive an electronic refund, awesome! Make sure you allocate what you promised yourself you would for important payments or items that need to be handled. If anything is left over, enjoy! You worked hard for this! If you receive a paper check, you can cash it at your local Speedy Cash store quickly and easily.
Take a Deep Breath, You’ve Got This
I’ve shared a few of my personal stories with you, despite it being kind of embarrassing to admit, for an important reason: taxes aren’t that fun, but you’ll survive. Mistakes can be made, things can be forgotten, money can be owed or lost and the truth that remains is simple! You’ll be ok no matter what.
Tackle the titan in front of you, prep your documents, get ready for tax time before the deadline, and more than anything just do your very best. That’s all you can do, and it will be ok. If you have a simple return to file, that’s awesome. Congratulations! File, grab your refund, and move on with your year. If you own a business, have properties that make tax time more complicated, or are facing back taxes, just know that you’re not alone. People have walked this road before you and you won’t be the last person to go through a stressful tax time. Death and taxes as they say… they’re always going to be there. Life, however, is always here too, and creating happiness and joy no matter the stress going on (including taxes) is up to you each and every day. Go forth and conquer your taxes and your own happiness! Onward.
1Forms, Instructions & Publications Retrieved from: https://www.irs.gov/forms-instructions
2Morgan Stanley Website (2022, February 4). Are You Prepared for Tax Day? Retrieved from: https://www.morganstanley.com/articles/tax-day-prep
3Walter, Derek (2022, June 29). 8 Tax Season Preparation Steps Retrieved from: https://www.businessnewsdaily.com/6689-tax-season-prep-steps.html
4Janet Berry-Johnson & Rose Wheeler (2022, October 27). Tax Prep Checklist: Everything You Need to File Your 2022 Taxes Retrieved from: https://www.forbes.com/advisor/taxes/tax-prep-checklist/
5IRS.gov Retrieved from: https://www.irs.gov/newsroom/tips-to-help-people-choose-a-reputable-tax-preparer
6IRS.gov Retrieved from: https://www.irs.gov/tax-professionals/verify-the-status-of-an-enrolled-agent
7Turbo Tax Expert (2022, October 18). Documents You Should Save for Tax Time Retrieved from: https://turbotax.intuit.com/tax-tips/tax-planning-and-checklists/documents-you-should-save-for-tax-time/L1sk0a3uU