With tax season here and taxes due April 18th, what is the best plan of attack for last-minute tax filers? I reached out to Best Selling Author, Rich Dad Advisor® & International Authority on Tax Tom Wheelwright,CPA to share his best advice for last-minute tax filing.
1. Don’t rush.
Yes, the April 18 deadline is approaching fast, and for those who have waited until the last minute, it can be a stressful time. Resist the urge to rush through the process. A hurried approach often leads to costly errors.
Instead, follow the steps below carefully. If you feel yourself getting overwhelmed or burned out, take a small break and come back to your work later. You want to keep a clear mind and calm head as you work.
It’s natural to want to get through tax season as quickly as possible. Still, remaining patient and diligent throughout the process will save you time, money, and frustration in the long run. Take the time to do things correctly the first time. You’ll pay fewer taxes and build wealth faster than if you rush.
2. Find a great tax advisor.
If you haven’t given any thought to your 2022 tax returns by now, you either don’t have an advisor or need to find a new one. A great tax advisor will work with you throughout the year to ensure your filing goes smoothly and that you pay the least amount of tax legally possible.
The ideal tax professional is a certified public accountant (CPA) who adopts a consultative approach. Your CPA should ask plenty of questions to understand your unique financial situation and goals. Look for someone with a proven system for permanent tax reduction and someone who brings fresh ideas to the table. Having someone like this on your team will position you for long-term financial success.
3. Get organized.
Before you meet with your tax advisor, make sure you have all your documentation in order. This is much easier if you’ve been diligent about bookkeeping throughout the year. If your records are a bit of a mess, invest the time in cleaning them up and implementing solid recordkeeping practices moving forward. Not only does this save you time and reduce stress, but it also enables your tax professional to review your financial situation quickly and accurately.
A thorough organizational system will include the following:
- W-2s
- 1099s
- K-1s
- Business or farm income statements
- Receipts and other support for deductions, including charitable contributions and expenses for operating a business or rental property
- Social Security number for yourself and any dependents
- Property tax bill
- Mortgage statement
- Documentation related to the sale of any property
- Student Loan Interest Statement
Double-check that all the information on your forms is accurate before submitting them to your tax advisor. Doing so can save you time, effort, and possibly money in the long run.
4. Maximize your tax credits and deductions.
While you need to file your taxes, what you really want is to reduce them. Credits and deductions are a key component of this part of your tax strategy. They are the government’s way of incentivizing certain behavior.
Tax credits give you a dollar-for-dollar reduction in your tax liability. Your tax advisor should guide you through the process of identifying the tax credits for which you qualify. There are tax credits for many different situations, including
- Having minor children,
- Paying for daycare for children or dependent adults so that you can work,
- Installing solar energy systems
- Buying certain electric vehicles,
- Adopting a child,
- Paying for some tuition and school fees
Tax deductions reduce the amount of your income that can be taxed. If you are an entrepreneur or investor, you likely have a long list of deductible expenses throughout the year, including expenditures for business purchases, travel, education, training, meals, transportation, and a home office. Other common tax deductions include paying for the following:
- State and local taxes
- Medical expenses
- Contributions to certain retirement plans and health savings accounts
- Interest on a mortgage or student loans.
While most deductions are restricted to activities you completed in the calendar year 2022, there are still some opportunities to create new deductions. For example, you can contribute to many retirement plans — including IRAs and SEPs — for the 2022 tax year through April 18, 2022. Work with your tax advisor to create a strategy that’s best for you.
5. Ask for an extension if you need one.
Even the IRS understands that there are times when a taxpayer simply can’t complete an accurate return by the deadline. If that’s the case for you this year, go ahead and file for an extension without shame. It’s better to give yourself the extra time needed to ensure accuracy rather than rush through the process and potentially make costly mistakes.
Remember: This is an extension to file, not an extension to pay. Any taxes you owe from 2022 are still due by April 18, 2023. That means if you owe additional tax, you need to make timely payments to avoid penalties and interest.
If you can’t make your full payment, talk with your tax advisor about your options. The IRS offers installment agreements in some circumstances, or you can look to pay via credit card or pay the small penalty (0.5% per month) for late payment as long as you can pay in full by Oct. 15.
Few people look forward to filing their taxes, but following these tips should alleviate some of the all-too-common tax-time stress. Remember: Don’t rush. Find an excellent CPA who takes a consultative approach. Make sure you have all the necessary documents together. Maximize your tax credits and deductions, and consider requesting an extension if needed.
Don’t procrastinate. Now is the time to tackle your taxes with confidence. With these five tips in mind, you’ll be able to easily breeze through tax season.
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