Tax time is a stressful time for many people, and it’s right around the corner — taxes are due on Wednesday, April 15, 2020!
Because I run a business, my taxes are much more complicated than they used to be. But, I still remember how stressful it was to prepare for and file my taxes each year when I wasn’t running my own business. I remember gathering W-2s, school documents, etc. Mine were fairly simple compared to some people’s taxes, but it was still stressful.
The way I felt was not uncommon, as the average person can become very overwhelmed during tax season. So today, I have several helpful tax return tips so you can take the necessary steps in order to prepare for tax season.
And, if you’re brand new to filing your tax return, then you may be even more confused. Filing tax returns comes annually, but it’s still something that pretty much everyone dreads, even if they are getting money back.
It’s hard to gather your paperwork, know how to file, and what to do with your money if you do get a refund, and this is exactly why I wanted to discuss tax return tips with you today.
Even though you still have a little bit of time before your tax return is due, it is so very important to start preparing for tax time now. Many people wait until the very last moment, and that can lead to mistakes, forgetting forms, spending more money on filing (forgetting tax deductions!), and more.
To help you feel more prepared and less overwhelmed, I have some great tax return tips for 2020.
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Below are 8 tax return tips for 2020.
1. Start gathering and organizing the information you need.
One of the most overwhelming parts of tax time is that there is a lot of paperwork involved in filing your taxes. So, hopefully, you have been keeping track of your receipts, expenses, donations, loan information, retirement contributions, and everything else tax-related for the past year.
And, in the past month or so, you’ve probably been receiving a lot of tax-related documents as well. You will most likely be receiving several important tax documents, such as your W2s, 1099s, and more. These will be coming from your employer, your school if you attend college, your mortgage, any investment accounts, etc. Actually, one of my other tax return tips is to not throw things away that look like junk mail — they might be related to your taxes!
Once you start receiving your important tax documents, you should be saving all of them together in a safe place. You will need all of them if you want to file your taxes correctly, so please stay organized.
Whew, I know that sounds super overwhelming!
If you haven’t started keeping track of those documents or gathering all of that together, then you will want to start collecting everything that you’ll need for your taxes right away.
Yes, you still have a little bit of time until you have to submit your tax return to the IRS, but I highly recommend getting this done as quickly and as early as possible — this is another one of my top tax return tips!
To prepare early means that you will want to start preparing and gathering your documents now, so you can be ready to file as soon as possible. This will also help you to know exactly what you need to gather, so that if you do happen to be missing something, you can get that document requested and ready!
2. Determine how you will file your tax return.
The next of my tax return tips is about how you will file your return, and you should start thinking about it now. Do you want to file your tax return on your own? Or, do you want to bring it to an expert?
There are many options for filing your tax returns, and I recommend looking around to see what best fits your situation.
If you want to use an expert, I recommend contacting someone sooner than later, as they may not have enough time to squeeze you in if you wait too long.
However, filing your taxes on your own is easier than it might sound. There are several different kinds of tax filing software, and they walk you through each step of the filing process.
3. Take your time when filing your tax return.
In 2015, there were 150,493,263 tax returns filed. But, the IRS reported that 1,627,645 returns were filed with one or more math errors That means that 1.08% of returns filed had math errors!
The next of my tax return tips is that you should not rush when you’re filling out your tax return forms, otherwise you run the risk of making simple mistakes. I recommend making sure that you set aside the appropriate amount of time in order to file your tax return. You should double check the information that you have entered to make sure that the details are correct.
Filing your tax return won’t take 5 minutes, in fact, it may take a few hours or longer depending on your situation. So, I recommend setting aside as much as you can so that you are not rushed.
4. Be aware of the tax return deadline.
This is one of the most important tax filing tips in this article! And, as stated earlier, personal tax returns are due on Wednesday, April 15, 2020. I recommend putting this on your calendar now, so that you do not forget. You may be penalized if you don’t file by this date.
Running around on the very last day trying to get your tax return completed can lead to errors, forgetting important tax documents, and more. With the tax return tips you’re learning about in today’s article, hopefully you can get a jumpstart so that you don’t have to stress about your tax return anymore.
5. Safely store your tax-related paperwork.
Once you’ve completed your tax return, the documents you used to file it should be kept in a safe place.
Your tax return should be kept in a safe place as well. Yes, this means you’re not throwing those documents away.
All of the documentation, forms, W2s, etc. are very important to have in case the IRS has any questions after you have filed your taxes. And, it just makes it so much simpler to respond to IRS requests by having everything organized in one spot.
In fact, the IRS suggests that you keep your tax records and any related documents for anywhere from three to seven years.
If the IRS needs your documents for something years later, remember that it will be extremely difficult to find everything you need if you are not organized to begin with.
Anyone who’s been in a situation where the IRS has contacted them years later, would suggest keeping your documents as one of their top tax return tips.
6. Figure out how you’ll use your tax refund.
The IRS reports that the average tax refund for the week ending April 5, 2019 was $2,833. That is a huge chunk of change, and some of you may be expecting even more money than that.
Here are eight smart ways to use your tax refund. You may decide to use all of your tax refund in one area or a combination of them all. Whatever you decide, it’s your choice!
Put your tax refund towards retirement. Putting all, or at least some, of your money towards retirement can be a great way to spend it. The plus side is that you still get to keep your money, which is a decision I’m sure you won’t regret decades from now.
Pay off your debt. If you have debt, especially high-interest rate debt, then you may want to focus your tax refund on paying off some of it. You can stop spending all of your hard-earned money on interest fees and instead be a little closer to paying off your debt. Or, maybe you can even pay off your debt completely! Just think about how less stressful life would be without all of that debt.
Beef up your emergency fund. An emergency fund is something I believe everyone should have. This can help if you were to lose your job, have a medical expense, have a home or car repair, and more. This will prevent stress brought on by unexpected bills or even prevent you from going into debt trying to pay them.
Use your tax refund to learn something new. Investing in yourself can be another great way to spend your tax refund. You might decide to go back to school, take a certification class, learn a new skill, or something else. Investing in yourself can be a great way to get motivated about life.
Start a business. Your tax refund may be just what you need to start the business you’ve been dreaming of, and many businesses can be started cheaply. Don’t get me wrong, though, some businesses can be expensive to start, but your tax refund may help you launch your business in the best way possible.
Take care of yourself. Is there an expense you’ve been putting off for a long time because you couldn’t justify spending the money on yourself? Maybe this is a visit to the dentist, a trip to the doctor, a massage, some alone time, or something else? If this describes you, then you may want to think about spending some of your tax refund on yourself.
Donate to a cause you believe in. Is there a cause you’ve been wanting to donate to but just couldn’t afford to in the past? If you have extra money left over from your tax refund, then now may be the time. You might even be able to claim a tax deduction on it next year.
Splurge a little. Splurging isn’t always a bad thing. I believe if you can truly afford it, then splurging every now and then is just fine. Maybe you’ll decide to go on a vacation, redecorate your home, buy yourself something you’ve been putting off, go out to a nice dinner, or any number of things. The key is moderation and making sure you can actually afford what you are spending your money on.
As you can see, there are many things you can put your tax refund towards.
7. Don’t wait until the last minute.
I used to wait until sometime in April to complete my taxes, but I still remember how stressful it was doing that. There was almost always some sort of document that I was missing!
Now, I don’t like to wait until the last moment when filing my taxes.
This is one of the tax return tips I’ve learned from personal experience — filing your taxes gets more stressful the longer you wait. By waiting until the last second to file your tax return, you may make mistakes, forget important documents, forget tax deductions that you deserve, and more.
You will feel so much better once your taxes are filed, trust me.
8. Start preparing for next year.
I’m ending my list of tax return tips looking forward to next year. Now that you’ve read through this article and know what you need to do to prepare for tax time, make a plan for next year.
You can find a place to start storing important documents now. If you have your taxes prepared by someone in 2020 but want someone new for 2021, you can start researching who to use.
Are you ready to file your tax return by the deadline? Do you have any other tax return tips to share?
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