By this point many people have already submitted their taxes. Many more will wait until the April 15th deadline, which can mean long lines at the post office. Both groups share one thing in common: they can both start preparing for next year’s taxes right now. Taking easy, simple steps in the short term can make your 2014 taxes that much easier.
1. Know who provides your tax forms
At the start of the new year you can expect tax forms from any company that paid you money the previous year. But just because you can expect these forms does not mean you will receive them. Some companies, particularly smaller ones, might neglect to send you a form. Others might not even know they’re required to send you one. Yet you are still responsible for your taxes, which involve those very forms.
Before you do any work for a company, whether as an employee or as a contractor, know the person in charge of handling tax forms. At a larger company that’s easy enough, since most larger companies have HR departments. But when you take on contract work from smaller companies, it might not be apparent immediately. Find out who deals with those forms, so you know who to contact in case you don’t receive them.
2. Keep detailed records
There is a chance, albeit small, that you will get audited. The more red flags on your return, the higher your chances. The only way to beat an audit and not pay additional taxes and penalties is to keep meticulous records. That’s the only way you can show the IRS that your tax return is clean. (If it is, in fact, clean.)
Whenever you earn even a penny, record it in tax software such as QuickBooks or TurboTax. If the taxman comes calling, you’ll have records to back up your claims. Then again, if you’re careful enough to keep records like this in the first place, chances are you won’t get flagged for an audit at all. But you never know, and you never want to be caught off-guard.
3. Create additional savings
If you have just one source of income and it’s from a W2 employer, you have little to worry about. Your company automatically deducts, and pays, your taxes. In most instances you’ll receive a refund at year’s end. But the world has changed considerably in the last decade. More and more people are working on contract, meaning they get 1099 forms — which means they don’t have taxes deducted from their checks.
Anyone who earns income from anything other than W2 needs to create additional savings so they can easily write the tax check. It is all too tempting to treat that full paycheck as you would a tax-deducted one, but it’s also the easiest way to end up in the IRS’s doghouse. You can use a simple tool like Mint’s home budget app for iPhone to ensure that you are creating a blanket of savings that you can fall back onto if you owe money at the end of the year.
4. File quarterly
Another reality of not having your taxes deducted: you’re still expected to pay quarterly. Traditional employers file taxes quarterly, though employees might not be aware of this. If you don’t have taxes deducted, you are also expected to pay every quarter. Failure to do so will result in interest penalties when you do file. The only solution is to follow the guidelines and file quarterly.
You can find the proper forms at the IRS website. Download them, and make sure they get mailed on the 15th of April, June, September and January.
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