The Dos and Don’ts of Filing Taxes

Ah, tax season: the second-most stressful time of the year for Americans. While many of us look forward to a nice little tax return after we file, it’s still not the most enjoyable process to go through. However, it doesn’t have to be as annoying as we make it out to be. Here are some things to make sure you do during tax season, and some things not to do:

Do come prepared

It’s likely that many of us spent our first working years scrambling around tax season to find all of our relevant documents. (To be fair, filing taxes is a lot less burdensome when you only make $12,000 dollars a year like many of us did as teenagers.)
If you spend all year filing documents in one place (hopefully an organized drawer or filing cabinet), then you won’t be anxious about missing things, and you’ll roll up to your accountant (or your computer, where your tax software is) confident that you have everything they need to file.

Don’t wait too long

Some people are natural procrastinators and tend to push things to the last minute. When it comes to the government, this isn’t recommended. You don’t want to be up until midnight on April 17th, biting your nails because you can’t find the proof that you were insured all of 2017. If you’ve already taken the advice in item one on this list about being prepared, then there’s no reason not to get a jump start on filing your taxes as soon as you get your W-2s. Even if you owe and you file early electronically you can postpone your payment deduction until any date before the filing deadline.

Do file for an extension

Some people need more time around tax season, and that’s okay. Life is busy and sometimes people get sick, have major life events, or, for whatever reason, just can’t get it done on time. If you’re expecting to get a return, then it won’t hurt too much to file for an extension, though you may want to check the IRS rules before you do so. If you end up owing on your taxes, you will be charged interest on the money you owe from April 17 through the date when your taxes are received.

Don’t forget to update your W-4

At the beginning of every tax year, or after every major life change (new baby, new home, new marriage), everyone should be updating their W-4, as recommended by the IRS.

Do remember your side hustle

The Department of Labor reports that as of 2017, 7.6 million workers in the U.S. have multiple jobs. If you’re one of them, and you’re driving for a rideshare company, designing logos on the side, or even just working weekends for a friend’s contracting business, it’s important to remember to claim your earnings. While the short-term gain can seem appealing, not claiming that income could come back to haunt you and can even warrant an audit from your friends at the IRS. Not reporting wages is highly frowned upon by the Feds (psst…It’s called tax evasion and many people have gone to jail because of it).

Don’t go it alone

While there is a form named “1040EZ,” it may not be so “e-z” to understand. That’s why so many Americans choose to file with the help of an online software. There are dozens of popular programs to choose from, and some of them are relatively inexpensive. Not only that, but they make filing taxes much less confusing.

For those of us with more complicated returns, it’s a good idea to hire a tax preparation professional. These professionals can be well worth their fee if they are able to find additional deductions and yield you a smaller tax bill or a larger refund. There are many in-person options for tax preparers nationwide but it can be beneficial to find a CPA or tax preparer you trust and work with them year after year.

Do research things you don’t understand

If there are terms you’re unfamiliar with, don’t be afraid to look them up. Google isn’t going to judge you if you have no idea what a 1099 is. The IRS has made strides over the last few years to make its website more user-friendly and helpful, too. Use it as a resource for areas you’re struggling to understand. It’s better to type silly questions into Google than it is to have your credit ruined because you filed incorrectly and now owe the government money.

Don’t expect much help from the IRS

While the IRS has tried to make its website a better resource for taxpayers, you may not have much luck reaching out to them, especially as April 17th draws ever-closer. Your questions would be better directed to a professional, such as an accountant or financial advisor. This isn’t the time to just “wing it.”

Don’t skip tax season

Unless you made under $600 last year, don’t try to just skip tax season. Even high school students with part-time jobs will need to file their taxes. It’s good practice for the rest of your tax-paying life. Plus, you don’t want to leave a good refund unclaimed.

Do celebrate your refund… conservatively

Now that your taxes are filed and you have nothing left to worry about except where to spend your refund, it’s a good time to think about some financial goals where that money might be put to good use, such as paying off a high-interest credit card or updating your kitchen to add value to your home. Whatever you decide to do, make it work toward your long-term financial goals, or to improve your credit score, and you’ll thank yourself down the road.

Many people find taxes intimidating, but they don’t have to be. Not everyone has multiple properties, a diverse portfolio of investments, or their own business to grapple with. For those people, taxes are serious business, and they have professionals to help them. For the average American who lives paycheck to paycheck, for example, taxes are simple enough, and there are plenty of resources out there to help you along the way. For more information on how to get prepared for tax season so your credit isn’t affected, visit www.credit.com.

If you’re credit is on your mind this tax season, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: iStock