Easing The Stress Of Tax Filing Season

Whether you do your own taxes, work with a CPA or tax professional, being proactive and keeping organized can go a long way towards easing some of the stress associated with tax filing season.

A good practice is to create a checklist of all the essential tax information and documents that you need (or may need) for the upcoming tax filing season as well as noting any material changes that may impact on your tax situation for the applicable tax year.

Generally, if you work with a CPA, it’s a good idea to touch base with your CPA regarding any material changes that may impact your tax situation during the tax year rather than waiting until it’s time to prepare your tax returns.

Periodically review the checklist (at the very least, annually) and update it accordingly as your tax situation changes or warrants. When it comes time to compile your tax information and documents, go down the checklist to make sure you have everything on-hand.

Common tax information and documents may include Form W-2 for wages from employment, Form 1099-INT for interest income earned on your interest-bearing bank account(s), Form 1099-NEC for non-employee compensation (ex: income from self-employment), amount of your contribution made to an individual retirement account (IRA) if applicable, amount of any tax-deductible donations (with applicable donation receipts), etc.

If you’re self-employed or a business owner, you may need to gather/compile business-related financial information depending on how your business entity is structured.

For instance, the sole member of a single-member LLC with default tax treatment typically should have on-hand business financials including a year-end balance sheet, income statement, and bank reconciliation. A member of an LLC taxed as a Partnership, a shareholder/employee of an LLC taxed as a sub-chapter S, or a shareholder/employee of an S-Corp typically should have on-hand their Schedule K-1 (keeping in mind that Partnerships and S-Corps also need to file returns at the entity level and those returns need to be prepared first in order to get the Schedule K-1s).

Go through your tax information and documents from prior tax years to help build your checklist.

As a side note … Self-employed individuals and those new to business ownership who opted to take a makeshift approach to managing their business finances (or co-mingled their business and personal finances) may get a wake-up call as compiling the requisite business financials may not be as simple and straightforward. (Read: Don’t use makeshift solutions to manage your business accounting/finance and don’t co-mingle your business and personal finances).

The tax filing season can certainly be stressful but if you stay proactive, organized, and avoid procrastinating, you’ll get through it.

For questions related to your tax situation, consult with a tax professional.