Tax Day Is Almost Here—Here’s What You Should Do

Believe it or not, after all we’ve been through, Tax Day is here again. Tax forms and payments are due July 15. As exhausted as most small business owners, freelancers, hourly, and even salaried employers are at this point in 2020, we still have to deal with taxes.

Taxes are an ordeal even in the best of times; in the worst of times, they seem especially cruel. But they don’t have to be that bad. Some resources can make taxes a little more manageable. You can delay or complete your taxes to the best of your ability now, and go back and perfect them later. Here are a few options to make the best of the looming deadline.

Extend your taxes until October 15. There are plenty of valid reasons to extend your taxes. With all of the chaos and change this year, being able to delay for a few more months may make the difference between total chaos and some return to normalcy. You can fill out the simple half-page tax extension IRS Form 4868 in just a few minutes. Remember that you’ll still need to pay an estimate of what you owe, but that might be a benefit, too, since it will give you an incentive and time to do the work to get some of that money back.

Some reasons not to extend. There are some very valid reasons not to extend your taxes. You might have a decent refund due, and you need the money. You might not have too many deductions or complicated tax matters, so you might as well get it over with. Either way, you’ll have to pay what you owe. Don’t forget, you can always amend the taxes you file using IRS Form 1040XThe IRS estimates that you can fill out the simple online Form 1040 in 17 minutes. Submitting this form, then going back later to review, either with a professional or using tax software could give you the best of both worlds: filing on time, and finding some new tax-saving strategies that will allow you to go back and get a bigger refund.

Get an accountant. The easiest thing to do if you have the money is to hire a tax preparer or certified public accountant to help with your forms. It will be challenging, but not impossible to find one at this late date, though finding an accountant to help you extend your taxes should be pretty straightforward. There are lots of resources on the web for finding a reputable accountant in your area. Start there, make a few calls, ask about fees, and get an estimate, in writing, for what they think your taxes will cost. Even if you just extend at this point, starting the relationship with a CPA will give you peace of mind now, and might provide some significant tax saving strategies by the extended deadline in October.

Gather your documents. Whether you file July 15 or extend, you’ll need to gather some key documents, including:

  • W2 or 1099 forms recording payments to you
  • Home mortgage payments Form 1098 (get this from your bank)
  • 1098-T tuition form (from your child’s college)
  • Retirement contributions
  • Cash gift records
  • Partnership or Corporate forms (1120s, Schedule K-1, etc.)

File for free. You’ve seen the ads about filing for free. Seems great, right? Well, last year, more than 40% of Americans filed online, but only 6.8% filed for free. Why? Because tax prepartion is purposefully a confusing mess. Comedian Hasan Minhaj took on tax preparation in his final Netflix show this season. His staff compiled a helpful, cleverly named (warning: profanity) site that takes you right to the free filing links. If you made less than 69K this year, you should be eligible.

You can find a checklist of everything you need to prepare on the web or from most accountants. This is an important, and surprisingly taxing (ugh, pun) part of the process. For me, it means going to the important papers box in my house, combing through bank and visa statements, and pulling up Quickbooks. The process of gathering all the items I need can take a few hours.

The hardest part is always setting aside the time and getting started. Most online banking sites provide a year-end tax summary and allow you to export your key monthly records to an Excel document where you can sort and calculate tax items. Think of it as a final exam from your school days. Only this time, you can show up in your pajamas for real instead of in a nightmare.

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