Many people wait until February or March to begin exploring their taxes. Unfortunately, if they owe money, it’s often too late by then to come up with the cash needed. Avoiding last-minute, unexpected tax payments is ideal and totally doable with some initiative. To avoid this issue for upcoming and future tax deadlines, try these four year-round tips.
- Manage Your Finances Throughout the Year
Image via Flickr by Witches Falls Cotages
Don’t wait until March to start gathering records and putting together our tax information. It’s much better to work on this throughout the year and to track income and expenses as they occur. Here are a few things to file away for your returns as soon as they arrive:
- Thank-you letters from charities
- Year-end investment statements
- Records related to a home purchase or expenses for home improvements
- Records tracking IRA and 401(K) activities
- Your annual tax returns and supporting documents.
- Keep Track of All Documents
In addition to keeping up with things such as receipts throughout the year, you also need to hold onto certain documents in case there are any questions with your filings or you need to confirm any details. A general rule is to keep your tax records for three years from the date you filed the return. An exception to this rule is if you file a claim for a loss from worthless securities or a bad deduction. In this case, the IRS recommends that you hold onto your records for the next seven years.
Keep track of these documents in an easy-to-reach place. Also, keep these details sorted by year. This will make it easier to refer to this information should the need arise.
- Work With a Tax Debt Relief Service
Tax returns are a wonderful part of the year for many businesses and individuals. But you may find yourself on the other side of the coin: owing the IRS after you file your returns. Hopefully, you can pay what you owe or break the sum down into an affordable payment plan. This isn’t always possible, though, especially if your taxes for the next year are piled onto the debt.
It’s advisable to work with a tax debt relief service for professional advice if you have unexpected money owed or need to manage or renegotiate your outstanding debt. This can be vital to communicating effectively with the IRS and minimizing what you must pay.
- Contribute to Tax-Exempt Accounts Year-Round
If you’re planning on setting up a retirement account, consider the tax-exempt option. This is a fantastic way to plan for your future, not only in terms of creating a fund but also maximizing the return you’ll get from your savings. Contributions to these accounts are made with after-tax dollars. This means withdrawals at retirement aren’t subject to taxes.
If you’re interested in better organizing your taxes, take some initiative moving forward. Following the above tips will not only make filing much easier, but you’ll also have plenty of time to arrange for any extra payments or information, if needed, to complete the tax process.