With the New Year comes the inevitable… tax time. Just writing those two words sends chills down my spine. Not because I dislike completing my taxes, but because this time of year reminds me of what is easily my worst job ever. I worked on New Year’s Day. I worked 14 hour days for the first two weeks of January for three years preparing the 1099’s for mutual funds. It was not fun at all. I know that many readers dislike tax time. I’m here to hopefully help to take some of the pain out of tax time for you.
The more organized you are, the smoother tax time will be for you. I cannot guarantee that it still won’t have its ups and downs, but the ride will be much smoother. To help me stay organized, I have a folder where I put anything related to taxes in during the year. This includes any copies of donations I made, tax bills I paid (think real estate taxes) as well as 1099’s and W-2’s.
To keep my 1099’s in order, I place a sticky note on the front of the folder and list out all of the 1099’s that I expect to receive from financial institutions. The first year I did this, I missed some of the firms, but when I received the 1099, I added them to the sticky note. As the years have passed, I now have a complete list of the 1099’s I am expecting. Since I don’t move my investing accounts and bank account around, the list tends to stay static.
All of this helps me to know when I can begin working on my taxes. By having a list of the forms I am expecting, I know when I have everything I need to begin my taxes. Additionally, by having all of my tax documents already in one place, I save myself time and the frustration of trying to find them.
Understand The Dates
Other than the deadline to file your taxes, you only need to be concerned with one other date: January 31st. This is when companies have to send out your 1099’s. What this means is that you can’t begin your taxes until after this date – assuming you have 1099 income (think interest and dividends from bank accounts and investment accounts). That leaves you with a window of mid-February to mid-March to tackle your taxes.
I say mid-February because some investment firms hold on to your 1099 until the middle of February. This is because there are times when mutual funds need to correct their distribution amounts. Instead of confusing you and sending you two 1099’s – an original and a corrected – they hold off and just send you one.
Schedule Your Appointment or Block Off Time
If you do your taxes yourself, as I have done for many years, make it a point to block off a Saturday or Sunday to complete your taxes. This includes Federal, State and Local taxes. I found that by having a set day to prepare my taxes helped me get them done quicker.
If you hire a professional to complete your taxes for you, schedule you meeting early – late February or early March. If you schedule your appointment with your tax accountant the week before April 15th, you are adding unneeded stress to your life. You know that there will be questions you need to answer as well as having to find a missing statement or form. The more time you have to answer any question or find documents, the less stressed you will be. For many, the sooner you get your taxes done, the happier you will be. So don’t suffer by putting off your taxes, get them done!
Change Your Outlook
Many people dislike paying taxes simply for the fact that they are giving up some of their hard earned money. I understand this completely. But this is negative thinking. Learn to think more positively. The more you pay in taxes means the more successful you were last year and the more money you made. Celebrate that! Paying taxes simply means you went out there and worked hard all year long.
At the end of the day, is paying 25% or 33% (How do tax brackets work?) of what you make really the end of the world? No! (In fact, what you actually pay in taxes in probably less than that when you take into account deductions, credits, and exemptions.) Be happy that you live in a place where you are free to be successful and you have a government that isn’t 100% corrupt. Your tax dollars go to help make this country a much better place than it would be without the tax revenue. So instead of hating taxes and thinking that the government is stealing your money, be proud of how successful you are.
At the end of the day, taxes are a necessary part of life. Instead of getting bent out of shape when tax time rolls around, do the things you can control to make the process much easier and less stressful for you – get organized, don’t procrastinate and have a positive outlook on things. Doing these will make tax time much more bearable and you won’t waste your energy worrying during the first three and a half months of the year.