Courage in Tax Time
By: Josh Duncan
Can Tax Time be . . . Easy?
Today I share tips for being courageous in tax time. Yes, filing taxes can be easy, and you can learn how to improve your tax situation each year. The bottom line is that you can do this—and here’s how!
(The video is about 4 minutes. Full transcript is below.)
Full Transcript of video
Hey friends, the Fearless Advisor here. Today I am going to discuss having courage in tax time.
Tax time may not be your favorite time of year due to uncertain outcomes.
Tax time is upon us, as we are within one month of Tax Day. For most Americans this is not their favorite time of year. I believe the reason is due to the unknown outcome of their tax return. Will there be a refund or a payment due?
Obviously, taxes are necessary for a government to function. Now, I don’t enjoy paying taxes any more than the next person. However, I do enjoy some of the services the government provides. But that’s neither here nor there.
How can tax planning help you prepare for tax time next year?
Now, let’s get to putting the fear of doing taxes behind us. First, we must acknowledge that there is uncertainty on whether our tax return will yield a payment or refund. However, we can prepare in advance with tax planning. This will need to be done with you CPA, financial planner, or a functional spreadsheet. This process will take into account your income, proceeds from any investment sales, and many other taxable events.
A CPA or Enrolled Agent can help complete and file your taxes.
Whether you had a chance to plan for your taxes or not, we still need to file your taxes. There are two ways you can complete your tax return. One option is to hire a CPA or Enrolled Agent. They will use all of your tax documents to complete your return and file it on your behalf. They will likely have questions for you along the way to ensure that they are properly completing your tax return. The cost of these services will vary depending on the number of tax forms you need to file and the time required to complete the returns. The average cost will be around $300.
There are low-cost software packages available for completing your taxes yourself.
The other option is to complete your tax return yourself. There are popular applications you can use, such as Turbo Tax, H and R Block, Tax Act, and Tax Slayer. These will cost about one hundred twenty dollars or less. The great thing about these types of software is they walk you through entering your tax information to complete your return. As long as you have all of your tax documents, W-2’s, gift receipts, and 1099’s, you shouldn’t have any problems completing your return. And, if you do, some of these applications can connect you with a tax professional to get your problem resolved. Your return will be electronically filed when complete.
A great time to start tax planning is right after completing your tax return for the previous year.
When your tax return is complete, the next step is to determine if any changes need to be made to prep for the current year. If you had to pay the IRS more than you like, you can increase your tax withholding on your paycheck to withhold more in income taxes throughout the year. Another approach could be contributing more to your pre-tax retirement accounts, which will reduce your taxable income.
State sponsored 529 plans may help reduce your state tax bill.
If you live in a state with state income tax and you had to pay on your return, there may be opportunities to reduce your state-tax income. Each state will vary, but a common option is using a 529 college savings plan.
Tools and resources are available to finish your taxes without stress.
Completing taxes, although not the most exciting thing to do, can be easy, and you can learn how to improve your tax situation each year. If you do not want to be a tax expert, you can partner with a professional to help you understand how to improve your tax situation. The bottom line is that you can do this.
Feel free to reach out for help!
If you need assistance or have questions about being courageous in tax time, the team here at F5 Financial Planning would be happy to support your family. Thanks for joining us!
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