Updated: Mar 24
It’s everyone’s favorite time of year: tax season! If you have any accountant friends, wave them goodbye and say a prayer for their sanity. There will always be a demand for seasoned CPAs, but more people are opting to prepare their tax returns themselves with new software programs and online help available. For those people, these tips may make your DIY tax season as painless as possible.
1. Review last year’s return. Looking back at last year’s return is a great starting point for preparing for this year. You may be reminded of your various income streams, see what deductions you’ve taken in the past, and ultimately lay the groundwork for organizing this year’s effort. You should keep last year’s return handy throughout this filing process for comparative purposes.
2. Create a checklist. This list should first document all your accounts, including savings (if generating interest income), investments, retirement accounts, Health Saving Accounts (HSAs), savings bonds, social security, and pensions. Check each account online for current year tax forms. If a form is generated, there is activity that should be reported on your return. It’s also important to make a list of events from the tax year that could impact your return. For example, did you buy or sell a home last year? Did you begin taking retirement income, have large medical expenses or pursue an educational degree you could receive tax credit for? Did you make charitable contributions from your IRA? Having a roadmap of these events will help ensure nothing is overlooked as you prepare your return.
3. Decide what tools to use. Online tax programs like Turbo Tax have several products available depending on how complex your return will be. They have live tax assistance for hire, or if you are pretty sure you know what you are doing, you can use their self-guided platform. For seniors, there is a free e-file tool on the IRS website for a simplified return. There are many options available, so make sure you pick the one most appropriate for you and that you thoroughly secure your account access.
4. Don’t forget your state filing. If you’re using a self-guided tool like Turbo Tax, they will prompt you to add state filing at the end. If you are using the e-forms from the IRS website, you will need to pursue filing your state return separately.
5. Save and sit. If time allows, it’s a good idea to wait a few days before filing. Take this time to compare to last year’s return. Do your final numbers make sense compared to last year? Do you have a financial planner or close friend, partner or other family member who could review the return prior to filing? It’s better to delay collecting your potential refund by a few days if it means avoiding an amendment later.
6. Follow up. Once you’ve filed your return, make sure you save a final version for future access. If you use a software tool like Turbo Tax, you will receive confirmation emails on your federal and state return status. Make sure you check your inbox for any follow up required so as not to delay your filing or incur a penalty.
Tax software can make taxes seem easy, but keep in mind there is a lot of room for error. Following the above tips may keep you on track and feeling more confident about tax season. Good luck!