Ready to file your taxes? Our Director Xiomara Lorenzo shares her #nofilter perspective on how she stays on top of her taxes.
A coworker asked me the other day if it’s early to start talking about the upcoming tax season. In my opinion, definitely not.
Even though many of us may still be receiving our tax documents in the mail, there are steps we can take now to make sure it’s not a mad scramble to the tax deadline on April 17!
Here are 3 ways to get started:
Figure out how you’ll file.
The most common tax filing options are hiring a tax professional like a CPA, using a self-service option like TurboTax, or using a walk-in service such as H&R Block.
Before I met my wife, I had experience with all of the above. Once we got married, it made sense to revisit each option since our financial situation was changing.
Ultimately, we decided to hire a professional since our tax situation became more complex. We wanted to make sure we were filing correctly and taking advantage of any tax benefits available to us.
If you plan to work with an accountant, find one who fits your needs and don’t be afraid to interview a few before you decide on one. Ask friends for recommendations, look for options within your neighborhood, and check online.
Keep the following in mind as you do your due diligence:
- Negotiate. If you own a business, see if the accountant is willing to cut you a deal if you’d file both your personal and business taxes with them.
- Set a price before filing. When we decided to get a new accountant, they requested the previous year’s tax return to get a sense of our profile and the complexity of our tax needs. Ask the accountant what they would have charged for filing your return last year so that you have a sense of what to expect for this year.
- Build a relationship. In addition, ask what the policy is regarding supporting clients after tax season. Ideally, you’ll find an accountant who will answer your questions as they come up throughout the year without charging exorbitant fees for simple inquiries.
Write down any big life changes.
Big life changes can affect your tax profile. Examples are starting or winding down a business, the death of a family member, the addition of a child, moving for a job, getting married, and more. Depending on which tax preparation option you choose, you will likely be prompted to address if there were any major taxable events over the previous year. Take a moment and write these changes down before you start filing. You may remember things better when you’re not under pressure to meet a deadline.
Organize your documents.
I can’t stress enough how much you will thank yourself later if you’ve been keeping yourself organized from the very first tax document you received. It doesn’t really matter how you do it: my wife and I love all things digital, so we rely on shareable documents and cloud-based storage. If you’re a little old school (no judgement here), you can use a plain ol’ manila envelope to store your tax documents as they arrive.
Keep in mind that our process may not work best for you and it may take some trial and error to find what works. Either way, I promise that getting organized isn’t impossible.
Here’s how we do it:
- We use DropBox as a safe, cloud-based storage system for all of our tax documents.
- For each tax year, we set up a new folder, labeled with that year, complete with a standard set of subfolders. These subfolders are organized by the categories of documents we usually receive such as: W-2s & 1099s, health-related tax forms, forms related to investments, charitable contribution receipts, and so on.
- As we receive documents, whether it be electronically or via snail mail, we “drop” them into the respective sub folder. What I love about Dropbox (similar apps may have this feature as well) is it includes the ability to hover over a document and take a clear scan of it. Once the document is scanned, you can save it into the folder. It might seem like overkill, but we keep the hard copy in a filing cabinet folder just in case.
- For our accountant, we create a spreadsheet which lists all the documents in our taxes folder and save it to the folder. When we’ve received all of our documents, we send it over to our accountant along with a link to the Dropbox folder. If we receive a tax document after we’ve shared the folder, we just add the document to the folder and give our accountant the heads up.
Not sure which documents you’ll actually need? Use this checklist as a resource to get you started.
There you have it. Figure out how you’ll file. Account for big life changes. Organize your documents so they’re ready to go long before that deadline hits. Remember, you don’t have to wait until April 17th. With a little prep work and organization, you can file your taxes ahead of schedule—and spend tax day doing something you really love to do.
Happy tax season!
As Director of Society of Grownups, Xiomara brings together deep expertise with consumer-focused investment and retail banking research, while wearing the latest in 3D printed fashion.
Any third-party resources or websites referenced above are not under Society of Grownups control. Society of Grownups cannot guarantee and are not responsible for the accuracy of the resources, websites, or any products or services available through such resources or websites.
While Society of Grownups hopes the information is useful, it’s only intended to provide general education. It’s not legal, tax, or investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with a financial planner.