What’s the first thing that comes to mind when you hear the word ‘taxes’? Chaos?! Turmoil?! Armageddon?! Please just let the aliens take me away?!
Friends! It doesn’t have to be that way! It’s totally possible to file your taxes with ease and without needing a sugar infusion to get you through the process. With a few small changes, you can get yourself organized and grounded for your taxes.
This week on the Andi Smiles Show, I’m sharing my favorite tax prep tips to help you stay organized and calm during tax season AND to ensure you get your taxes filed on time.
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Find Out What You Need BEFORE You Start Prepping (2:55)
This is actually one of my favorite tax prep tips. This tip is to find out what you need before you start prepping for your taxes. The biggest mistake I see when people prep for their taxes is that they do a bunch of work and later find out that they’ve done too much work because they’ve gathered more information than they need.
You know what time it is when this happens? BUMMER TIME!
Some people do a bunch of work but miss the most important pieces of what their tax preparer needs. Before you start doing any work around getting ready to file your taxes, find out what you need.
This is going to look like a couple of things. Here’s the first.
If you have a tax preparer reach out to them and let them know you’re working to get everything ready for them to file. Ask them what they will need from you. A lot of times they’ll send you a checklist. Sometimes they’ll just write you back and say what they need. In either case, ask your preparer before you go down a rabbit hole of a bunch of stuff that you think you need for your taxes that you don’t.
If you’re not using a preparer and you’re going to DIY your taxes, then TurboTax has a really handy prep list. Even if you’re not using Turbo Tax, it’s still a really good prep list because it lays out everything you need to gather.
Why do we do this step?
We’re doing this so you do not put a bunch of exhausting work into prepping for your taxes and find out that you have a whole other mile to go because you didn’t get the one thing that you need.
Give yourself AT LEAST 2 Weeks to Prep (6:32)
I say at least two weeks, but if you give yourself a month you’ll feel A LOT better about your tax prep process. You’re not going to prep all day every day for two weeks- because if you did that you wouldn’t be able to function and would hate all things money. This is really about carving out time for your taxes during those two weeks.
Let’s talk about why you need to carve out this time.
One- because shit happens in our lives and you need padding. It does not actually take two weeks all day every day to prep for your taxes. You’re scheduling this time because you’ll likely have something come up in your life or in your business that’ll cause you to fall behind.
When stuff goes down in your life it’s super stressful. And what you want most of all is NOT to be freaking out about your taxes on top of everything else. Don’t allow yourself to go into freak out mode. Give yourself a lot of padding time.
Another reason to give yourself padding time is that when we rush we miss deductions. This is just how it is. If you’re rushing through your tax prep process and not being careful, you’re going to miss tax deductions. When you miss tax deductions you pay more on your tax bill.
The last reason to give yourself time is that when we are rushed we make mistakes. I’m a professional bookkeeper and I look at numbers all the time. I have a really high tolerance for looking at numbers and I gotta tell you- when I am rushed, overwhelmed or I’ve been working too much, I make mistakes even though this stuff is easy for me.
Trust me. You don’t want to be prepping for your taxes in a chaotic, rushed state because mistakes are going to happen. That’s just the reality of it and you really don’t want mistakes to happen on your tax return. If you catch them later it’s a pain in the ass to fix and you definitely don’t want the IRS to catch them before you do.
So what does this mean for you?
First, it means to make your tax appointment with enough time to get everything ready. I see a lot of people getting really excited and making appointments with the tax preparer a few days after they meet them.
When they do this, they have five days to prep for their taxes and they don’t even think about all the time and energy involved. So when you make your tax appointment and even if you’re filing yourself, make sure that you make that appointment with a two week lead time for you to prep your taxes.
Make appointments with yourself to do the prep work.
Don’t just say “Oh, I have two weeks to do my taxes. I’ll get it done,” and then there’s no time actually set aside for the work.
You need to sit down, look at your calendar, and carve out 2-3 hours a week to prep for your taxes and then block out that time.
If you have an online scheduling calendar make sure you block that time out so people can’t schedule in those time slots. Even if someone only schedules for like 30 minutes, it’s going to interrupt your momentum of getting your tax prep done.
Make a Home for EVERYTHING (13:34)
Make a home for everything means making sure that all of your tax documents, records, or whatever financial work that you’re doing to prep for your taxes live in one place. We don’t want documents piled around the house getting lost!
All the physical paper that you receive related to your taxes goes in one place, like a file folder, a plastic filing bin, or an accordion file. It can be anything. It doesn’t matter what the vessel is as long as everything is in one place- even if that one place is just one pile on your desk!
If you’re filing your taxes with another person and you both receive tax mail, you may need to follow up with them to make sure all your tax documents stay together. So when I say a place for everything, I mean everything goes in one place for everybody in your household that you are filing taxes with.
Use the same idea is for your digital documents. Create a folder where all your digital tax documents live- both docs you receive and reports and printouts for your tax preparer. The best part of a digital folder is that, when you’re ready, you can just e-mail that folder to your tax preparer.
If you have a virtual tax preparer and you’re scanning your physical documents, again all of that stuff is going to go into that one folder. I personally like to create a folder named TAXES 20XX and keep it on the desktop because then I can never forget about it.
Keep an Updated Checklist (17:30)
There’s a lot of details that are involved with our taxes. That’s why it feels overwhelming- because there’s so much to keep track of! SO, before you even start doing your taxes, create a checklist.
When you carve out those two weeks for tax prep, your first day should be sitting down and creating a tax prep checklist for yourself. This is how you’re going to stay really organized.
The checklist should have 3 sections. The first section of your checklist is Information Needed. This part of the checklist is information that you need to gather. Now remember, we already said in tip number one to contact your preparer and ask them what you need. You already know what you need, now you just need to make it into a list on your checklist.
The second section of the checklist is Action Steps. Action steps are the actions that you need to take in order to get the information you need. Here’s an example: Your tax preparer tells you they need a Profit & Loss report and you haven’t finished your December bookkeeping. Your actions step is to finish your December bookkeeping so you can run the report.
The third section of your checklist is Follow Up Needed. This has to do with general tax questions you have for your preparer OR questions you have for people you file your taxes with.
As you project the amount of time you need based on your actions, create done dates for yourself. Look at your checklist and your timeline. Really give yourself some clear deadlines around when you’re going to do these things because you don’t want them all piled up towards the end of those two weeks.
Remember that file folder for all your tax items? Guess what? Your checklist lives there too!
Don’t Get Stuck on Questions (22:48)
When people are trucking along on their taxes and a question comes up, they lose momentum in their tax prep process. They feel totally clueless and they go on this wild Safari into Google trying to figure things out. The journey into Google eats up the time that they’ve set aside for tax prep work because their time is now focused on finding all the answers instead of completing tasks.
When a question comes up write it down and move on with your life. Don’t sit and try to figure out those questions right away- make a note of it on in your tax document folder and keep going. This way you won’t get distracted on the internet and lose your momentum.
Let’s talk about the types of questions that people have in their tax prep.
The first is they have questions about their own records. This could be a weird expense you don’t remember or if something looks funky and you need to investigate it. It could also be an expense you’re not sure how to categorize. When you have these items come up, just schedule time to investigate.
If you have general tax questions, email your tax preparer or ask Google. If you are paying someone to file your taxes take advantage of the fact that you have someone to answer your questions. That’s what they’re there for.
Most tax preparers are happy to answer questions for you. They want to get your information as organized as possible because it makes their job easier. Don’t be shy about emailing your tax preparer.
Of course, don’t just e-mail your tax preparer every single day when you have a question. Compile a list and send them a list of your questions. They will appreciate being able to just answer everything at once rather than having to respond to you every single day.
That’s everything. Use these tips to whip your tax prep to-dos in shape in an organized way.
Ready to get your finances prepped for your taxes? If you want to know about the actual step by-step process for prepping your taxes then I have a 60-minute workshop called Panic Free Tax Prep. It will help you get your financial records organized into a packet that you can hand off to your tax preparer or use to file your own taxes with ease.