It’s That Time of the Year Again: Are You Prepared for Tax Season?
It’s that time of the year once again. No, we’re not talking about Christmas, but tax time. For most people, preparing taxes is the last thing they want to do. It takes a while, it’s tedious, it’s easy to make mistakes, etc. However, with the proper preparation, organization, and planning, tax time does not have to be daunting.
Solo 401k tax saving strategy
If you are self-employed, consider establishing an Individual K, also known as Owner Only or Solo 401k Plan. This qualified retirement plan is designed specifically for a self-employed, small business owner.
A Solo 401k is an advantageous tax saving strategy. The plan has numerous features and benefits that are not found in other qualified retirement plans. You can utilize its high contribution limit up to $55,500 for 2012, take a loan against the plan balance, and administer the plan simply and cost effectively without the need for a custodian.
Preparing your paperwork
Proper planning is vital for making tax season as stress-free as possible. When the April 15th deadline is approaching, the last thing you want is to be unsure where all of your documents are. These documents can include paystubs, W-2s, receipts, and other important tax forms.
One easy way to prepare is to store these documents in one designated place as you receive them. Start preparing for next year’s taxes as soon as you’ve worked on this year’s. Buy a filing cabinet, or even a few file folders, and start storing your documents there. The system doesn’t have to be complicated, just provide a place for the documents to go.
Hiring a professional
For some, organizing and planning may not be enough. If this is the case for you, consider hiring a professional to do your taxes. A professional goes a long way to remove concern over mistakes or complications. Taxes can be tricky and complicated; a qualified professional can be of great assistance. For example, if you are a freelancer, taxes can become complicated because taxes are typically not taken from your paychecks. You are are responsible for paying your own taxes and obtaining filings such as a 1099 form. No matter what the situation, there are certified tax preparers out there who are prepared to handle it.
Using tax preparation software
A professional is obviously a good choice for tax preparation. However, they can become pricey in the long run. For those who need little assistance with their taxes and a lower expense to file them, tax preparation software is an option to consider. Turbo Tax, Quicken, eFile, and others are readily available, cost-effective (and sometimes free), and easy to use. Tax preparation software is available for just about any situation. There is software for the college student, for the freelancer, or for special situations such as residency in another country. A simple online search will produce many income tax software options.
Tax time does not have to be a time of suffering. Start by dedicating some time to sit down and reviewing what needs to be done. With proper planning and an early start, your taxes can be done in no time.