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Expert Advice to Make Taxes Less ... Taxing & Score a Big Return

January 13, 2020DMT Beauty

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Guy's Guide to Taxes

Tax season has a bad reputation – there’s just so much paperwork, reviewing and, well, praying that you checked the right boxes and claimed everything just right. Nobody wants an unintentional rendez-vous with the IRS, after all.

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If you want 2020 to be the year you finally get your taxes done on time and in an organized manner, read on. We spoke to CPAs and personal finance experts to get their best tips on how to take make the tax season less taxing. These tips and tricks will prepare you for April 15 well in advance, make tax season a little less of a headache and potentially lead to a higher return.

1. Review the Previous Year's Tax Return

“The best way for taxpayers to get organized for their 2019 tax filing is to perform a brief review of their 2018 tax return,” explains Logan Allec, CPA, personal finance expert, and owner of personal finance blog Money Done Right. “Sometimes, taxpayers forget the individual files or supporting documents they needed to file their tax returns themselves, or that their CPA required for the previous year.” Reviewing the previous year's tax return will get you in the right mindset and help you to focus your organization efforts on those recurring, significant income and expense items.

2. Review Your Estimated Payments for 2019

The IRS requires taxpayers to make estimated payments throughout the year. According to Allec, generally, a taxpayer’s estimated tax payments must exceed the lesser of 90 percent of their current year tax liability or 100 percent of their prior year’s tax liability. “Taxpayers who are traditional W-2 employees have their estimated payments withheld from their paychecks and remitted on their behalf to the IRS by their employer,” explains Allec. “However, self-employed taxpayers must make these estimated payments on their own. Taxpayers should compile an organized list of their estimated tax payments for 2019 to ensure the minimum estimated payment threshold is satisfied.” Keep in mind that the final estimated tax payment for the fourth quarter of 2019 is due January 15, 2020.

3. Fill Out a Tax Checklist

Many tax preparation websites and tax preparers have annual checklists for taxpayers to complete for the 2019 tax year. These checklists should be updated annually to incorporate changes in the tax code. “Completing an updated checklist will help taxpayers analyze their current tax situation and potential taxable transactions that occurred during the year,” explains Allec. In other words, filling out a tax checklist will ensure you’re not met with any surprises when it comes time to fork over your tax payments.

4. Make Sure You Have Contributed to an IRA

“If you have extra cash hanging out, you want to get a good return on your money, and you want to reduce your taxes all in one go, then look no further than an Individual Retirement Account (IRA),” explains Alex Caswell, Wealth Planner at RHS Financial. “For 2019 taxes, you can contribute $6,000 if you’re under the age of 50 and $7,000 for those over the age of 50.”

5. Check if You Made Any Charitable Contributions

Sometimes we forget about all the small donations we've made throughout the year, thinking they would never really amount to anything. If you think you made some donations within the last year, take a quick glance through your transactions – between Facebook birthday donations, charitable Christmas gifts and the occasional one-off contribution, you could be missing out on a lot of returns, explains Caswell.

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6. Start Collecting Your Documents Early

“Your employer, investment firms, loan providers, and other financial institutions will distribute documents at different times at the beginning of the year,” says Caswell. “In order to not scramble last minute, it is important to stay on top of your accounts and get all the relevant documents together as early as possible!” Make a digital or physical folder to keep everything organized and in one place.

7. Don’t Forget Your Side Hustle

“The IRS is always on the lookout for both unreported income and high expenses,” explains Dave Du Val, Chief Customer Advocacy Officer at TaxAudit. Self-preparers should be cautious of accidental duplication of employee and business expenses, of attempting to forego reporting side hustle income and of taking losses on activities that might be a hobby rather than a business activity. Don’t forget that just because the IRS sees your business as a hobby, it doesn’t necessarily make it so!

8. Don’t Overlook Your Deductions

“The most overlooked deduction is the home office because many CPAs are afraid that it may create a red flag for the IRS,” explains Tom Wheelwright, CPA, CEO of WealthAbility and author of "Tax-Free Wealth." “Your CPA should never be afraid of the IRS, and business owners should carefully consider taking this deduction!” Many business owners don’t realize that when they have a home office, it can increase their automobile deductions as well. Because commutes aren’t deductible, walking 30 feet to your home office can be your commute, and then driving to the office or appointments becomes deductible as travel.

9. But Don’t Try to Over-Deduct

“The IRS loves to pounce on people who report high itemized deductions, especially for charitable contributions and medical expenses,” explains Du Val. “It’s fine to claim these legally allowable deductions for your actual qualifying expenses, but make sure you have your documentation on hand to support your position before you file your tax return.”

10. Consider Filing Your Own Taxes (Or Not)

Don’t think you absolutely need to see an accountant if your taxes are pretty straightforward. “My best piece of advice for filing taxes is to consider the best method for your needs,” says Riley Adams, CPA and Senior Financial Analyst for Google. “If you earned under $66,000 in 2019 and have a DIY attitude, consider using the free filing software made available to you by federal law at the Free File Alliance.” This provides the same tax software sold to millions for free if you qualify. Why pay for what you can get for free? However, if you’ve made it to the bottom of this list and you’re still feeling uneasy, it may be worth it to hire a CPA to ensure nothing gets lost in the mix.

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Kaitlyn McInnis, Khareem Sudlow

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