The winter holiday season is over: now you should start thinking about preparing your taxes. Are you in panic mode yet? Don’t be. With careful planning and research, you can start to tackle your federal and state income tax work, and be successful at it. And not pay through the nose, either.
Too many people freak out about preparing their taxes. Some professionals want you to freak out, so they can charge you money to do your taxes. Others scare you into thinking that only they can prep your taxes in order to get you your maximum refund or lessen your bill. But if you try my advice, you might save yourself a lot of money and learn a few things as you go along.
I admit that for many years, I did freak out over the prospect of doing tax prep. Every year until 2010 I would beg my dad to “do my taxes.” Every year he rolled his eyes, scolded me and then did the work. And I still had to do a lot of the prep work and listen to his complaints about how poorly I was at record keeping. Early in 2011 he took ill and was hospitalized, so I knew I had to do my taxes. I would visit him at the hospital or nursing home, pester him with questions (and he enjoyed talking about taxes) and take notes. When I filed my own taxes that year, he was proud of me. (He kept telling his friends who visited that I had finally done my taxes!) Sadly, my dad is gone, but I do my own taxes. In tribute to him, I offer advise on how to make the process easier.
If you never before worked on your taxes, take a deep breath and tell yourself “I can do this.” Rather than running to an accountant, convince yourself that you can get through this. Even if you do hire an accountant or other professional, you have to do prep work and put together the necessary papers. A reputable pro will ask you lots of questions and you will need to do your homework. Thus, you may as well do your own!
Next step: take a look at the Internal Revenue Service website.
At first glance it is intimidating. But click on a few links. Try “Credits & Deductions” to start. Or “Do you need to file?” Familiarize yourself with at least a few of these. The IRS website is comprehensive and can answer many of your questions. You can also phone up representatives if you have specific questions or issues. I have called the IRS at least once or twice every year, with precise questions, and found the staff to be helpful.
Another way to get started with tax prep is to take advantage of free sessions or seminars that you see advertised. For instance, on January 8th H&R Block will have free, no appointment necessary talks on how the Affordable Care Act can impact your taxes. Their website offers tips for tax prep. The website for Jackson Hewitt Tax Service also offers tips, and sometimes they have free in-store seminars too. Another source is My Free Taxes.com for people with household income of less than $60,000 for 2014. In addition many community groups and non-profits, even churches and synagogues, offer tax service days. But those may be close to the April 15 deadline.
Relax. This is just the start. Part Two of my series will offer more concrete tips and planning ideas.