Next week, the IRS is officially "open for business" when it comes to accepting tax returns. While you may not be quite ready to haul out your file of tax receipts (You did keep them, didn't you?) and gather up your other financial information, you should definitely psych yourself up to do so soon. Where should you start your tax season prep? With these tips from our team of tax professionals:
1. File early. Even though Tax Day is a few days later this year (April 18, to be exact), there are several reasons to file your taxes as soon as you can, especially if you are owed a refund. At the beginning of the season, the volume of tax returns going into the IRS is lower, so they can turn around refunds more quickly. The same is true for tax professionals: The closer it gets to April 18, the busier we CPAs get, so set and appointment and keep it. Even if you owe taxes, you can file early and not pay until April 18.
2. Know when to ask for an extension. If you don’t have all of your tax documents and the calendar says April 18 is coming, you still need to let the IRS know you intend to file. Your CPA can get an automatic extension of six months to file your taxes, but you still need to pay your estimated tax debt by April 18 or you will face fines.
3. Follow up with your tax professional. When you meet with your tax pro to go over your taxes, it’s possible they will ask for additional documents you may have left at home or have not yet received, such as mortgage interest statements or 1099s. Get these tax documents back to them as soon as you can, so they can file your return.
4. Be organized. Don’t walk into your tax appointment with a shoe box of crumpled receipts and expect fast service. If you keep your business records organized throughout the year, they will be much easier to go through come tax time, which can help you avoid errors and missed business expenses.
5. Be honest. Your tax preparer can only file a return based on the facts and documents you provide. He or she doesn’t want you to guess about expenses or income, and lying about those details is a surefire way to get in serious trouble with the IRS.
6. Be optimistic. Your tax professional is there to help you, not help the government. Any CPA worth their salt will a) help you get the deductions and tax breaks you qualify for, b) show you how to find more, and c) keep you compliant with the IRS.
7. Plan ahead. Meet with your tax professional before it's crunch time...don't wait until March and definitely don't wait until April to engage the services of a tax professional. Leaving taxes to the last minute not only increases your stress level, but it also means that you won't get your potential refund until much later.
8. Look to the future. Once your taxes are filed, resist the temptation to stuff your tax receipts and other supporting documents in a drawer and forget about taxes until next year. Instead, set a calendar reminder to make a tax planning appointment later in the year with your CPA . Looking at your taxes before they are due is the best way to fend off a big tax bill...while there are still options available to reduce your income tax obligations. Your CPA can help you develop a strategic tax plan based on your situation.
Bottom line? Tax season's opening day (according to the IRS) is almost here...don't procrastinate about taking care of your taxes. Reach out to your tax professional now to avoid last-minute stress, delays, and the possibility of not getting the refund you are owed asap.
Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.
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