We’ve heard stories before about celebrities owing big money to Uncle Sam and it may come as no surprise that Hollywood troublemaker Lindsay Lohan was reported by TMZ as being in the red with her federal taxes from 2009. The report said that Lohan figured her accountants had things under control and so she had no idea that she owed this money. Let this be a lesson to you—no matter how much money you have, make sure your accountant is on his or her game!
Now if you’re not Lindsay Lohan, you probably just can’t bring in a million bucks for a Playboy shoot and so making sure things are good with the Feds becomes particularly paramount. Here are a few tax tips to help make sure your taxes go without issue:
Technology is your friend
Unless you have an accountant that does all your books, make sure you take advantage of tax software and the seemingly endless supply of online resources including tax calculators to estimate your refund (or what you might owe), specialty questions such as unemployment, retirement, or self-employment related paperwork, and also inside info on deductions that may save you money.
Plan your record keeping
It’s so easy to pull a Lohan and just forget about certain things, some of which might end up biting you in the butt one day. Proper record keeping is essential to making things less stressful come April. According to HR Block, you should keep all supporting tax documentation for a minimum of 7 years in case of an IRS tax audit. You should also keep financial documents, receipts for deductible items, insurance and medical records, theft or loss documentation, gambling records, charitable records, and self-employment records.
Look for loopholes!
Good tax software and/or accountants will find ways to creatively save you money. While an accountant is relatively expensive in terms of tax preparation, they may be able to save you thousands by working their magic. Sometimes by doing more forms, you can find ways to lower the amount you owe to the Feds, and while it might cost an extra hundred bucks or more to file extra paperwork, if you have to spend a hundred to save a thousand in taxes, clearly accountants can be well worth it. This is more likely the case if you are self-employed. Those of us that have simple taxes (like one W2) will be able to file online with little to no cost. Some services such as TaxACT will even provide inexpensive phone support for those that may need help while they are using the software. This could be the best of both worlds—doing it yourself but with an expert to answer a few lingering questions.
Whatever your tax situation might be, make sure you don’t put it off to the last minute. My goal is to get it done during March. If you are like the millions of people who are eagerly awaiting their refund (so they can finally pay some bills), then obviously waiting to the last minute won’t be a problem!
For 2012, embrace the technology. I suppose people may be doing their taxes on their iPads, sharing their progress on Facebook, and using smartphone apps to keep their records!
For 2012, keep good records. Life is too short to make taxes the pain in the butt it could be if you let it.
For 2012, look into loopholes if you have more complicated finances—that’s what CPAs are for, right? Of course!
For 2012, get in habit of making the following tax year easy—so that everyone else might be irritated, but not you.