UNITED STATES—Tax season is that time of year that so many of us jump for joy, others we dread. Yep, I’m referring to those self-employed candidates. Rather you owe Uncle Sam or if you’re expecting a return, preparing for tax season is important.
The biggest problem most people make when it comes to tax season is not being prepared. Having all that paperwork in order from the previous year makes a ton of a difference. The worst thing that can happen to any American is to be audited, this tends to happen to those who ‘guess’ about their finances instead of actually knowing.
Don’t do such a thing; it can become a very costly mistake. This rule definitively applies to those who tend to itemize. You better make sure you have receipts for all those items that you are listing as potential expenses for the tax year. The one thing that is critical when it comes to filing your taxes is your W-2 which most should have received by this point from their employer. If you’re a contractor or self-employed you might be expecting a 1099.
A common mistake is for many to do their taxes themselves, instead of allowing a certified CPA or accountant to assist with the matter. Taxes are all about numbers, and all it takes is one simple mistake to cause a world of headache from the IRS.
Now let’s focus our attention on the good stuff. Most of us will see a return from Uncle Sam during tax season, so the focus of this conversation is what to do with those funds. For those who owe the government, try to plan ahead during the year, especially if you know you’ll likely owe. Why? This way you’re not dishing out loads of money that you might not have at a specific time period.
So precisely what should you be doing with your tax return if you’re expecting one? First, you have to be smart. Blowing all your money on a single item is never a good idea, unless its something like you absolutely need, like a car or down payment for a house.
It’s important that if you have any outstanding bills, especially those that are nagging you or if you hope to knock down that debt a bit, do it. The problem when most of us get our hands on lump sums of money, our brains go crazy doing things that may not be important.
I will make this argument, if you are expecting a return for your taxes; you are entitled in my book to purchase something for yourself. It might not be something of epic proportions, but you have to treat yourself to something.
I live by the ideology, that if you work, you’re allowed to treat yourself to something every so often. Doesn’t have to be the biggest thing in the world, but allow yourself to indulge a bit in something that you’ve been hoping to purchase
Many of you might be surprised to hear this, but breaking even during the tax season is what you want, that way you keep more of your money during the year. Rather you owe the government or they owe you, the key is to plan ahead. Be smart with your money, remember you’re in control. Don’t allow money to control you.