Are you experiencing March Madness? How many of you feel anxious when you’re preparing for tax time?
March is the month for me to pull my tax info together so I can prepare my tax return. I used to dread this task. As one client told me, she puts it off. Why? Because she’s overwhelmed, knowing it’s going to take HOURS/DAYS to get everything gathered before she even starts inputting her info into the tax preparation software, or handing it off to her tax preparer.
But it doesn’t have to make you go mad! Here are some ways to make taxes easier, so we don’t suffer “March Madness”!
Get Organized
I know, easier said than done! But throwing receipts into a shoebox is so “old school”! A little organization goes a long way. I suggest keeping a “2022 Tax Folder” for those random things you get in the mail throughout the year.
Income: Gather all of your income forms like W-2, Misc-1099, 1099-Div and 1099-Int, Pension and Social Security income, etc.
If you are a solopreneur, you probably have a Schedule C to report your income. Please, please, please, keep your business and personal income and expenses recorded and tracked separately.
You may even have a partnership so remember your K-1 which sometimes doesn’t get produced until mid-March. If you sold stocks you may have capital gains or losses to report, too.
The good part is you get these tax forms either mailed or emailed to you so print them and put them in your “2022 Tax Folder”.
Expenses: Keep track of your expenses throughout the year. HOW? You might ask? Well, you can use paper, spreadsheets, or apps to track your spending.
I’m old fashioned, so I still keep paper copies, and this is how I keep track of my expenses.
Based on previous tax years, know the categories of expenses you need to track if you itemize, like, mortgage interest, real property taxes, sales taxes paid on large items like a car or boat, medical and dental expenses, car registration fees, and charitable donations to name the most common. Keep in mind, these need to exceed the standard deduction for 2022 of $12,950 (single filer) $25,900 (married filing).
Tip: I keep track of my expenses in color-coded files throughout the year. I also have a piece of paper in the front of the file where I record each receipt as I put it in the file. (True confession, I TRY to record it each time, but sometimes it happens monthly.) This makes it so much easier when I’m doing my taxes. I pull out the file, finish adding up the receipts, if it’s not complete for the year, and I have my number to plug into my tax software. No hunting for receipts in my bank statement or credit card, or wallet, or who knows where those receipts end up!
If you’re more of a “techie” person and you don’t want to deal with paper, then use an app where you take copies of your receipts or upload them and organize them in “folders in the cloud”. (I’m still not sure where this cloud is!) One app with good reviews is Shoeboxed. Of course there’s a fee, currently $23/month. But it saves you from keeping papers stored, it’s organized, and ready for you when you do your tax return.
A couple more apps to scan and manage receipts include: Expensify, Smart Receipts, Receipts by Wave, and Tiny Scanner. It may be too late for 2022, but an idea to get you off on the right foot for 2023 taxes.
So you’ve got your documents, you’re plugging in the numbers, and you owe taxes 🙁
Don’t pay the IRS, pay yourself! Did you fund your retirement account? (I’m all about paying myself first.)
If you have earned income, you can contribute to an IRA or Spousal IRA and DEDUCT it from your taxes! The maximum contribution for 2022 is $6,000 ($7,000 if 50 or older) per person. You have until the day you file your tax return to contribute to your IRA.
Your future you will thank you when you pay yourself first, and save for retirement, all the time reducing your income taxes! Win! Win!
So I’ve provided you with a couple ideas on how to keep those tax receipts organized and how to reduce your taxes. Please share this with your girlfriend who’s procrastinating on her tax return.
If you’ve been struggling with getting organized for tax time, reach out for support and schedule your free 20 minute call. And make sure to opt into my private Facebook Group, Women Talk Finances, where we continue the money talk.