It’s tax season! I say that like it’s holiday season, and we should all be super excited. But for many of us, this is a time of high anxiety. It’s time to gather up your whole last year and report it to the IRS. But let’s face it, we all have other things we’d rather be doing. No one wants to spend a precious weekend on their taxes when we could be spending it outside adventuring. So here’s my list of things your tax preparer wants you to know before you get to their office to reduce anxiety90 for both of you:
- You will have a penalty on your tax return if you did not have insurance last year. This isn’t something we accountants devised, but we are the reluctant enforcers of the rule.
- Your tax situation isn’t the same as your coworkers, even if you made the exact same amount of money. There are a multitude of different factors that go into calculating your tax liability, so even if you friend got a $5,000 refund it doesn’t mean you will too.
- Receiving free a product in return for writing about or otherwise publicizing for a company is considered income, and must be reported at fair market value on your tax return. Unfortunate, but true.
- A tax deduction does not equal a tax credit. A tax deduction reduces your taxable income, while a tax credit takes the full amount off of your tax liability. Therefore, the several thousand dollars you spent on your home mortgage insurance may only save you a few hundred dollars. (One of my shameless plugs for living debt free)
- If you take your accountant a pile of receipts, it will cost you more money to have your taxes prepared. On top of that, if you aren’t keeping track of your expenses through the year, you aren’t managing your business well. Take the time to record your expenses so that you know what you are spending, and so that we don’t have to be mind readers.
- It’s worth paying for a professional to have your taxes prepared. Make sure if you use a tax preparation service instead of an accountant, that you are getting someone who spends time getting to know your tax situation so that they can make sure your tax return is thorough. Many tax preparation services employ people who have taken a short course that qualifies them to enter data into a tax return software program. These people may not know any more than you do about taxes.
- Please don’t expect same day tax preparation. Again, see number 6.
- A delay in the tax return deadline does not affect your refund. Your refund is affected by when you file your return. Just because we got an extra few days to submit tax returns this year doesn’t mean that everyone is going to get their refunds later. (yes, this is a real question)
- An extension to file isn’t an extension to pay. The IRS still expects payment before the filing deadline, even if you need more time to prepare your return. You may have to make a payment based on an estimate. If you pay later, expect to pay penalties and interest.
- Getting your tax refund when you get your taxes prepared is in effect a loan. A very high interest loan. So after you pay the fees for your “same day” tax refund, you may have paid upwards of 150-200% interest for money that probably would have been deposited into your account in about 2 weeks.
Tax season doesn’t have to be a miserable time. If you know what to expect and how to avoid spending more time on tax prep than necessary, it won’t even be a bump in the road. Happy tax season all, now get out there and do something fun!