Taxes for 2019 are due on April 15, and this time of year always brings a number of pressing questions for American taxpayers:
Whether you’re filing taxes for your business or just for yourself, tax season can feel overwhelming. But with some strategic planning and helpful tools, you can avoid feeling the stress.
Here are 7 helpful tips for an easier and less stressful 2020 tax season.
1. Start Your Tax Prep Early
Planning ahead for tax season has multiple benefits. Besides having the peace of mind that it’s one less item on your to-do list, you could avoid costly tax penalties.
Yes, you can always ask for an extension with IRS form 4868, but the penalty for filing taxes late can be as high as 25% of your total unpaid tax bill. Don’t let that be you. Start now! Set aside a bit of time each day from now until the deadline to gather and organize your tax paperwork. You can also use this handy tax checklist to help you prepare for tax season.
2. Get Organized
According to an IDC Research Study, businesses lose 7% of their productivity searching for and recreating lost documents, while finding a single lost document can cost a company an average of $122, according to PWC. So it’s time to get organized.
Create labeled folders for all types of tax documents, including both hard copy files and files on your computer: Business Expenses, W-2 Forms, Charitable Donations, and more.
Even beyond 2020 tax deadlines, it’s important to get into the habit of categorizing files immediately. A year’s worth of paperwork can add up, so the sooner you get organized, the easier your tax filing will be in the future.
3. Decide Whether to File an Amended Return
With the passing of the Consolidated Appropriations Act for 2020, changes were made to tax extenders and laws. Taxpayers who were unable to claim these tax breaks when filing previously can now file an amended tax return and take advantage of them.
It could be time-intensive to submit an amended return, but the deductions you could recoup by submitting one may be worth it depending on a variety of factors.
Check out Credit Karma’s suggestions for situations when you may want to file an amended return.
4. Consult a Tax Professional
Tax rules change and become more complicated every year. It’s important to file accurately in order to save time and avoid costly tax penalties. Don’t guess about how 2020 tax law changes will affect your 2019 taxes and personal returns.
Consulting a tax professional can help you make the most of tax season while keeping your sanity and saving you time. Confused about whether you need to consult a tax professional? Then you may want to check out these guidelines for small business taxes from The Motley Fool.
5. Get Your Refund As Soon As Possible
Be aware of the factors that can affect the timing of your tax refund.
- How the return is filed – Remember that filing electronically is always faster than by mail. Choose to receive your refund by direct deposit instead of by check to cut down on wait times.
- Which credits you claimed – By claiming certain tax breaks, you can expect to wait longer to receive your refund. These credits include the Earned Income Tax Credit and the Additional Child Tax Credit.
Keep in mind that the IRS issues your tax refund – not any e-filing service you might use to streamline the process. Those filing services can’t guarantee when you will receive your refund. If you want more information, you can always use the IRS’s Where’s My Refund tool.
6. Take Note of Other Important IRS Updates
The IRS has made important adjustments related to workplace retirement savings for 2020.
- The employee contribution limit for 401(k), 403(b) and the majority of 457 plans is now $19,500 – up $500 from 2019.
- For those 50 years and older, the catch-up contribution limit has increased from $6,000 last year to $6,500 for 2020.
Make it your goal to put aside a couple extra dollars in your retirement account at work each month. Doing this will lower your taxable income, and help cut back on your tax bills going forward.
7. Use eFax to Do More Than Fax
There’s more to eFax than being able to easily send a fax by email. With eFax, you can sign tax documents right from your smartphone using the free eFax mobile app. You can also categorize faxes with keywords like "W-2" and "Insurance" and keep records of your faxes for the life of your account.
As 2020 Tax Day approaches, put these seven helpful tips to use so you can streamline your tax preparation and head into Tax Day confidently.
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