22 Nov How to Make Tax Time Easier
Use these proactive tips to make tax time go smoothly for you—and your tax preparer.
Having to think about taxes every year can be stressful, but there are ways to make tax time easier. Dealing with taxes is truly an ongoing process that culminates in a tax return some time the following year. As the end of the year approaches, tax advisors are sharing their year-end advice. To make sure that tax prep is as painless as possible, take heed of their expert advice:
Get Started Early
One way to make tax time go smoothly is to start planning as early as possible. This might mean starting to plan for your 2022 tax return in 2021 instead of waiting until the end of the tax year. As Jeremy Wells, PhD, EA shared on Twitter recently, “The return is a reconciliation of what happened during the year. Every decision you make 1/1-12/31 affects it. Past that point, your options become much more limited. In other words, the return isn’t prepared during tax season. It’s pretty much already done at that point.”
The return is a reconciliation of what happened during the year. Every decision you make 1/1–12/31 affects it. Past that point, your options become much more limited. In other words, the return isn’t prepared *during* tax season. It’s pretty much already done at that point.
— Jeremy Wells, PhD, EA (@JWellsCFO) October 27, 2021
Bookkeeping is a Key Component
Getting organized and keeping good records is key if you want to stay on top of your taxes. Doing a year’s worth of bookkeeping right before a tax deadline is expensive and delivers little to no value to your business. Tax professionals often charge a premium during peak season, and some won’t—or can’t—fit in the work. Some CPAs will file an extension for their clients right out of the gate, which could cost you if you haven’t already made payments to cover your tax debt. As Marginwall Bookkeeping advised in a recent Tweet, “Tax prep starts with good bookkeeping. We charge more for URGENT catch up work, so please don’t wait until the last second to ask for help!” Keep your bookkeeping up-to-date in real time, reconcile and close your month in regular intervals, and resolve things as you go.
Tax prep starts with good bookkeeping. We charge more for URGENT catchup work, so please don't wait until the last second to ask for help!
— Marginwall Bookkeeping (@marginwall) October 28, 2021
Using digital records makes working with your tax advisor simpler and more efficient. Try using these valuable tips to save you and your accountant time:
- Scan documents, don’t send Jpegs
- Scan multi page documents as a single document
- Name your files with the date, vendor or relevant name, type of transaction, and reference number if applicable. For example, “39390 Fogged In Bookkeeping INV 11.20.2021.pdf”
When sharing documents with your accountant, it’s important to send them securely. Always use an encrypted file sharing service when sharing sensitive documents with your tax professional. Great bookkeepers, accountants, and tax professionals take data security seriously.
Schedule Regular Check-Ins
Check-in in the fall with your tax preparer, especially if something unexpected has happened, like a major change to your income. “I always tell my clients, let’s check-in before my recommendation for payment could ruin your holiday plans. We have a lot of opportunities during the tax year and very few once it is over,” said enrolled agent and owner of Personal Financial Services, Elizabeth Ruh on Twitter. If you set regular meetings with your advisor, you’ll be a step ahead when it comes to preparing for your yearly tax return.
I always tell my clients, let’s check in before my recommendation for payment could ruin your holiday plans. We have a lot of opportunities during the tax year and very few once it is over.
— Elizabeth R. EA (@Eligabiff) October 27, 2021
Use a Checklist
Checklists are a great way to stay on top of your taxes and make sure you’re hitting key deadlines. Use a checklist throughout the year and as you wrap up your tax preparations to make tax time easier. Fogged In Bookkeeping has a checklist we suggest our clients use to prepare for tax time—you can view it here.
Maximize Your Savings
Maximizing your savings during tax season is doable if you stay in communication with your tax advisor. Touch base before major sales or purchases, as your tax professional may have valuable advice that could result in savings now or long-term. “Please inform us of any major transactions ahead of tax time so that we have time to tell you what information to gather, and can run calcs now, instead of during the crunch of busy season,” tweeted Steven Fafel, CPA, MST.
Please inform us of any major transactions ahead of tax time so that we have time to tell you what information to gather, and can run calcs now, instead of during the crunch of busy season.
— StevenFCPA (@stevenfcpa) October 28, 2021
Be Respectful of Your Tax Advisor’s Time
During tax season, your accountant will be busy preparing your return in addition to other clients’. It’s important to know what your tax professional’s timeline looks like. If you share information with them at the last minute, they may not be willing or able to accommodate you. Ask when they need your information, and be prepared to hit their target deadline. In many cases, being respectful and getting the necessary documents and information to your bookkeeper or tax preparer on time can result in a lower bill and higher quality tax return for you.
Preparing for tax season can be overwhelming, but tax professionals are there to help make it more manageable. Being proactive about your taxes is the best way to make sure your return is filled quickly and correctly.