Mid-February: Winter and Valentines to many, but for me it’s Tax Prep time!
Are you one of the roughly 8 million people that extend filing taxes each year? Do you really want to spend the end of summer stressing out to recall where you put receipts or how to finish a task you loath? Why not use the sleepy winter months of February and March to wrap up last year and file your taxes on time! I promise it will make you feel like a master of your finances.
I too used to dread doing the work it takes to get ready for tax season – but with a few tweaks to my process and thinking – I embrace this time of year. Filing my taxes gives me the feeling of putting a final bow on last year and moves my attention to this year and the future.
One reason I didn’t like filing taxes is that there is so much information you need to have on hand to make the process feel less burdensome. So, whether this is your 1st or 50th time you are filing taxes, the information below will help you move from dread to financial master!
Key Dates:
· Tax Filing Deadline - the current deadline for most people to file 2022 income tax returns is Tuesday, April 18, 2023, with a few exceptions and extensions for people in states/counties where there were disasters. Google dates for your state/county to ensure you have the correct info.
· Extension Request - The deadline for requesting an extension is also April 18. Requesting this extension would move your filing deadline to October 16, 2023. And remember, the extension is only to file – you still have to pay any estimated taxes by April 18th. Why estimate when you can finalize and be certain of any tax refund or added payment!
· IRA Contribution – This is also (you guessed it) April 18th, 2023. You have until the day you submit your taxes to contribute to your traditional or Roth IRA. If you haven’t’ maxed out your contributions it is good to consider this. More on this topic in our next blog.
Information Needed to File:
Now this is the hard part - there is so much data needed to complete your taxes. How do you know you have it all? A few years ago, I created a checklist to help me compile what I needed: filing statements from my employer, local property tax forms, 1099’s for investments, income and expenses for the rental properties I own, etc. I use it every year, make any updates and provide it to my accountant with the correct data. With this check list, I complete this prep task in a about an hour, and I am super happy about wrapping it up before spring when I want to be outside gardening or hiking with my friends.
Tip: Check out eFile's list of typical documents that may be helpful to create your own checklist.
Regarding when you should start this prep task – I start early in February to ensure I have all the data inputs needed. It is important to understand there is one timeframe for receipt of most data. Entities: banks, your employer, your side-gig employer, are required to mail or deliver electronically their reports on your income by January 31st. You may receive other documents in early February – and sometimes a corrected statement from investments pop up mid-late February. This means you should mark an afternoon on your calendar the last week of February to review the data you have received against your checklist to ensure you are ready for tax filing.
In the next blog – coming shortly – I will discuss options on how to prepare and file your taxes, planning for your refund or added tax payment, and other useful topics. If you need help getting prepared for tax time, feel free to schedule a no cost Clarity Call with Evolution Financial Coaching to discuss how we can help you get started.