Tips for Personal Tax Prep – Making Tax Season Less Taxing

Tips for Personal Tax Prep

We understand. The whole idea of hauling that box of papers out of the closet, sorting through them to decide what’s important and what’s not, pestering people to collect whatever documents are missing (and not being quite sure what those might be), then heading to the accountant’s office with frazzled nerves as you fear the worst outcome … tax season is rarely anyone’s favorite time of year. Trust us, we get it. We Make Tax Season Less Taxing

For some folks, going to the accountant is like going to the dentist: You dread it enough that you only go when you absolutely have to, and you spend the whole time there with a sinking feeling that you’re about to find out something bad.

The problem with that approach is that there might be something that’s a tiny issue now, something that’s easily fixable with a few adjustments, but it could wind up being a major issue next year. Avoiding your CPA doesn’t prevent the issue; it just makes it worse. (Also like the dentist.)

At our offices, we tend to only see some clients when there’s a huge problem. Maybe a few years ago they thought it would be easier, less scary, to have their friends do their taxes. Then they wind up sitting in our office, terrified because they owe a $4,000 penalty to the IRS for gross income omission.

Had they made the small investment in a CPA, they would have benefitted from a knowledgeable expert spotting such an oversight early on and correcting the mistake—or, at the very least, helping them to anticipate and mitigate the consequences. Paying us for an hour of our time buys you peace of mind. And trust us, there’s nothing more valuable than that.

We’re firm believers in surrounding yourself with professionals. You shouldn’t diagnose your own illnesses, you shouldn’t fix your own electrical system, and you shouldn’t manage your own stock portfolio—not without experts in your corner. And you shouldn’t file your tax return without insight from a trained professional, either.

We also won’t need you to bring in that dreaded box. When you call us and schedule an appointment, we’ll let you know what things we’ll actually need from you—and it won’t be as much as you’d think. At our meeting, we’ll go through your document package together, and we’ll let you know if anything’s incomplete, doesn’t look right, or is missing. Don’t worry about being perfect; no one expects that. We’re in this together, and we know that you’re not an expert. We’ll talk you through what’s next and make filing your tax return as un-scary a process as possible.

Then comes the most important part of the meeting: planning next year. The more thought you put into next year’s tax filing, the more rewards you’ll reap. Next year, we will remind you it’s tax preparation time to help you collect the documents you’ll need and to schedule a meeting. And then we’ll debrief—what went well, and what didn’t? What changed for you? What adjustments should we make in response? What are your financial goals, and how can we help you reach them?

Are you convinced? The April 15 tax deadline is fast approaching, so contact us today to schedule an appointment or to discuss any concerns you may have. We’re ready to help you make tax season a whole lot less taxing.

Are you a small business owner? Check out our tax prep tips for your small business!

 

9 Financial Resolutions for 2019

Nine financial resolutions to get your finances in shape for the new year.

If you’re like us, the last month has been a blur of excess—too much food, too much sugar, too much spending, and just plain too much stuff! But now that the new year has begun, it’s time to make those resolutions to eat better, get in shape, and get the house in order.

But are your finances in shape for 2019?

It’s never too late to get your financial house in order, but January is an ideal time to start with a fresh, clean slate. As you’re pulling those documents together in preparation for tax time, why not spend a little extra time cleaning out your financial clutter and laying the groundwork for a more stress-free year?

Here are 9 financial resolutions we suggest making right now for a healthier bottom line:

  1. Set financial goals. What more could you be doing to grow your money, increase profits, and spend or save more wisely? Write down your goals and determine steps you can take toward reaching them. Don’t let this step intimidate you—we’re not talking about major changes here. Start small. Maybe you’re looking to save more money for retirement, a major purchase, or a vacation? Try putting aside an extra $50 each week, or from each paycheck. Even just $5 more per week gives you $260 more at the end of the year.
  2. Create a budget. You know it’s a good idea, but it seems intimidating, not only because it’s extra work but because you’re worried you’ll discover you can’t afford things or will be limited. Here’s a secret the financial pros know: The opposite is true. When you make a good, detailed budget and adhere to it, you’ll be amazed by the feeling of freedom that comes as a result. When you’re designing a budget based on reality and that addresses every type of spending you do in a month (and even a bit for savings), you’ll realize that there aren’t any surprises. Your debts, your groceries, the gas for your car, the office supplies, the new shoes, even those dinners out … they’re all accounted for, and you’ll feel ready to tackle it all in the month to come. If you’re having trouble figuring out how to start, let us know—we’re happy to share tools and tips to get you off on the right foot.
  3. Invest in accounting software. Numerous tools exist to help individuals and small businesses keep track of their finances, from Xero to Quickbooks and more. When you put your financial details into a personal accounting system, you’ll get a clear picture over the coming year of where you’re spending—or spending too much. Perhaps you’ll also realize that you can afford to save or donate more than you thought you could. Your system can probably enable you to make a budget and help you stay on target each month. It may even help you to catch fraudulent activity more quickly since it allows you to look at all your accounts in one place and over time. The more you use it, the more data you’ll have in order to make wise economic decisions. Many systems even allow you to set up bill paying, which leads to our next resolution…
  4. Schedule automatic bill payments. In the end, we’re all human. We get busy, we take vacations, and statements occasionally get lost in the mail. But your most important bills—such as your mortgage, rent, and utilities—are due at the same time each month or each quarter. Why not take some work off your plate this year and schedule automatic bill payments through your bank, creditor websites, or personal accounting system? This will help ensure that you never make payments late or miss them altogether, which will ultimately help your credit score. Setting it up takes a bit of a time investment, but in the long run, it will save you time for other more important things.
  5. Keep credit in check. As of this month, the average American household has an average of $5,700 in credit card debt, according to a survey of consumer finances by the U.S. Federal Reserve. And this same research shows that the higher the credit card debt, the lower the net worth. If your holiday spending went on credit cards, resolve to get your debt under control and pay it off. Resolve to never charge what you can’t pay off in full the next month, or just stop using credit altogether. Set up automatic bill pay to ensure the full balance is automatically paid on time, every time. If your debt is too large to pay at once, start small. Pay your minimum payments each month, and put anything extra you can afford going toward paying off the smallest debt. Once that card is paid off, roll the payment into what you pay toward the next one.
  6. Plan to donate. As I discussed in my last post, the new tax laws will greatly affect how people donate to charitable organizations. When you’re creating your budget, figure out how much you can afford to donate each week, month, quarter, or year and set up automatic donation payments.
  7. Track mileage. Although the new tax code may make itemization unnecessary, it’s a good idea to start on the right track by keeping a close eye on expenses, just in case itemization becomes an option. One thing you can start doing is tracking your mileage. The IRS will allow business owners or independent contractors to either write off actual vehicle expenses or mileage, whichever is higher. A number of apps exist, such as MileIQ, Mileage Tracker, or MileLogger, to help you easily record mileage and calculate potential reimbursement. And be sure to keep a backup of this data elsewhere, just in case something happens to your phone or device.
  8. Plan IRA contributions ahead of time. This time of year, you may hear from your financial advisor that you can squeeze in last-minute contributions to IRA accounts without missing the April 15 contribution deadline. Then you’re scrambling to see what you might have lying around to put in. A better idea is to consult with your CPA to determine how much you can contribute in the coming year and set up automatic transfers each month. This is a much more pain-free method since we often don’t miss what we never felt we had to begin with. This is a particularly good method for self-employed individuals, whose income may fluctuate from month to month, making it hard to come up with unplanned IRA payments.
  9. Set up your CPA appointment! Accountants’ schedules are already filling up, and before you know it, April 15 will be here. Call to schedule your appointment today to get your tax filing done and out of the way, so you can enjoy any potential refunds even sooner.

From all of us at Ludmila CPA, have a healthy, happy new year!