It pays to get ready. In every sense of the word, that is true when it comes to your taxes. As the deadline for filing your taxes is fast approaching (it’s on April 15, 2020), you should already be preparing to file your taxes. This isn’t exactly a walk in the park. This is our least favorite thing to do in the whole year, but it’s a necessary evil, so they say. For those of you who have already received their W-2 from their employers, you should have filed your taxes before January 31.
But businesses have bigger responsibilities. Get your QuickBooks tune-up in McKinney, Texas or other cities before the tax season. Okay, way before the tax season. You must get your affairs in order before the end of every fiscal year. That will give you a lot of respite from the stress usually associated with having to collect financial statements, expenses, income, liabilities, and many other things.
Pay Enough Tax Every Quarter
The Internal Revenue Services (IRS) expects you to have paid enough tax even before you file your tax returns. That’s a win-win situation for both of you. The IRS will have the money to circulate during the whole year, while you would have a form of savings from the IRS when they give you back your money via a tax refund.
For most people, the withholding tax deducted from their paycheck is enough to cover the tax they owe to the government. But if you have multiple sources of income such as an investment and a small business, the withholding tax might not be able to cover the tax you owe. This creates a problem because you’d have to pay the difference and you could also be facing penalties.
Get Your Tax Records Straight
Your W-2 documents will be sent to you by mid-January at the latest. But before that happens, you can prepare your tax records. Make sure to call your HR department and other sources of income to confirm your current address. Look over your old tax records and see who has sent you documents to file. You can use this as a checklist to make sure that you have everything covered before the deadline for the filing of taxes.
If you are including dependents in your tax returns, you should prepare their documents, too. You can declare your children and elderly parents as dependents. You need their Social Security numbers and tax ID numbers, birth dates, any alimony payments, childcare payment records, and adoption papers (only if applicable).
Track Your Income and Deductions
Make it a point to list your expenses and profit every day. Use your smartphone or go old school with a pen and paper. This is a great way to track your income and expenses (deductions). Sources of income include your regular salary, freelance work, business income, dividends, income from gambling or sale of stocks and property, and income from prizes and awards (like winning the lottery).
You should also take note of possible deductions. These will significantly lower the amount of money you owe to the government. Deductions are generally expenses of self-employed, rentals, investments, property tax payments, medical expenses, childcare expenses, student loans, state and local taxes, donations, and many others.
You have to pay the taxes every year. It’s not like you can get away with it. And the best way to do it is to be prepared. It’s overwhelming to see the amount of paperwork, but it’s an absolute must if you don’t want to get in trouble with the government.