It’s that time of year again when every other ad you see is from Turbotax. It’s tax season! That means every American adult is doing the same activity of preparing documents and other information to file their taxes. In fact, did you know that more than 150 million individual and business tax returns are filed every year with the IRS? That’s a lot.
But just because everyone’s doing it, doesn’t mean filing taxes is easy. With all the paperwork and technical jargon, it’s easy to get mixed up along the way. Lucky for you, we’ve rounded up some tips to help you prepare and file your taxes right the first time around.
1. Make Sure You Have the Right Forms
First tip: Make sure you have all your information. There are a lot of forms that all share pretty similar names. It can be confusing to know exactly what you are going to need. But a little mistake on your tax return could end up costing you. Incorrectly reported or missing information can result in a penalty fine and even interest accrued on the money owed.
So let’s make sure you have the right information! Here’s a chart with a list of the forms you might need.
2. Make Sure you Have the Right Help
Taxes are complicated and getting some help could be a good idea. Here are some professionals and resources that can help you make sure you are filing correctly.
Certified Public Accountant (CPA)
If you have a fairly complicated tax situation, you may want to consider hiring someone who has specific expertise in taxes to help you file your tax return. The Certified Public Accountant or CPA designation will identify someone who is licensed specifically for tax preparation.
The CPA designation means that an individual has gone through a series of rigorous coursework and taken an exam in order to obtain the CPA license. They therefore have particular expertise in accounting and tax preparation. Financial advisors can have a CPA license along with other licenses required to manage your money. Or someone may have only a CPA license.
So how much does it cost to hire a CPA? It varies depending on the firm and your particular circumstances, but many CPAs charge by the hour and often have hourly rates in the hundreds of dollars. Expect to spend at least a few hundred to a few thousand dollars when hiring a CPA.
The cost can be worth it, however, if you have a mountain of returns to file or your circumstances are complex; for example, if you own your own business. Remember, you can always shop around a bit and get quotes from a few different CPAs before making your decision.
Not all financial advisors will be able to help you with your tax returns, but there are other tax-related services that you may be able to benefit from. There’s more to tax planning than just filing your return every spring. In fact, optimizing your taxes can make a huge difference in your wallet for years to come.
Where and how you spend and invest your money can impact your income bracket and thus your tax withholdings. A financial planner can help you look long term to make the most of your taxes both now and in the future. Just make sure to find an advisor that specifically offers tax planning services, as not all advisors do.
According to the IRS, 90% of Americans e-file their taxes. If you aren’t in the 10% that is mailing in their return, you might look to online tools to help you with filing. In fact, many online tools will guide you step-by-step through the process.
Especially if you have a fairly straightforward tax situation, online tools may be all you need to do your filing. Some popular tools include TurboTax, H&R Block and TaxAct.
These softwares also often have very helpful guides and checklists that can help you get prepared. Search their websites for resources if you feel stuck or just want to double check that you’ve covered everything in your return.
3. Make Sure you Have Enough Time
If, for some reason, you’re not able to get your taxes filed by April 18 of this year, you’ll want to make sure to file an extension with the IRS (and your state) to let them know.
An extension gives you more time to file your taxes, but not to actually pay them. Penalties and interest will start accruing on April 18, so make sure you’ve paid in enough to cover your taxes.
On the other hand, if you have the means to file your return but not to pay what you owe, file it anyway. The penalties for not filing are worse than the penalties for not paying.
Find a Financial Advisor with Lasso
Want a financial advisor to help guide you through tax season and tax planning? Lasso is the game-changing app that connects investors directly with advisors, making your search as easy as possible. Take the next step in your financial journey by downloading the Lasso app today or signing up online.