If you’re creating your New Year’s resolutions, don’t forget to include resolutions for the new tax year. Getting off to a solid start with organization and sound tax planning practices will save you serious headaches at this time next year. Here are three New (Tax) Year’s resolutions to keep in mind as 2016 approaches.
1. Get organized
Now is the time to set up a filing and/or record-keeping system for all of your tax documentation, especially if you plan on itemizing your deductions in 2016, or are self-employed.
Keep all of your receipts and paperwork in one location, and set up a filing system that works best for you. Set aside a filing cabinet or folder if keeping papers copies of documents is more your style, or set up electronic folders if you plan on scanning your income documents.
If you are self-employed or have a side gig or tip income, set up a spreadsheet for recording your tips and miscellaneous income. Set up another spreadsheet for your expenses, and update it as the year progresses.
You will be able to refer to all of your records quickly when tax season rolls around next year.
2. File early
No one likes the idea of filing their taxes, but if you plan to file early, you can correct any errors you might find on your tax forms, such as your W2 or 1099 forms. Make sure these forms have your current address, and that your name and social security number are correct. By planning ahead of time, you can allow for the extra time should you need to have any of these forms corrected…no last-minute hassles.
Another benefit to filing early: you’ll get your refund earlier. As an early filer, you’ll also experience a quicker turn-around in processing and mailing your refund.
By filing early, you’ll also be less at risk for identity theft. The longer you wait, the more opportunity identity thieves have to file a fraudulent return in your name.
3. File for an extension
If you’re facing the Tax Year of Doom and the mountains of paperwork that goes along with it, consider filing for an extension. This is especially true if there are tax documents that will be delayed for any reason. If you know for certain that you will not be ready on tax day, filing an extension will relieve much of that tax-day stress.
An extension could buy you the extra time you need to get your tax documents in order and to receive documents that have been delayed for any reason (e.g. financial records related to a divorce, sale of property, trust or an estate). Your extension will expire on Oct. 15.
Tomorrow: Even more New(Tax) Year’s resolutions