Simple Steps For Tax Prep – Step Five
Today we complete the tax prep series. If you missed the first half of the series, go back to Step One, Two, and Three and Four.
First, decide if you will file your own taxes or if you will hire a tax professional.
If you have a fairly straight forward return – a couple of W-2’s, and a mortgage deduction, you can likely file for yourself online. It’s not hard and the software will guide you through with simple questions. If you have one or more complexities – a side hustle, self employed income, college expenses or anything more complex, I strongly advise a tax pro. You don’t know what you don’t know – but they do!
Yes, a tax professional will likely cost more that the self-file, but it could save you the cost of that fee and much more if you are missing out on some unknown tax code. A word of caution: Not all tax professionals are created equal. I would steer clear of any tax professional pop-ups like HR Block and anywhere that hires seasonal temp help in the classified want ads. These are likely college students doing temporary work of data entry – which you can do yourself! You want someone who eats, sleeps and breathes taxes and more importantly legal or ethical tax minimization.
Sorry, Uncle Sam. We love ya, but you’re a black hole when it comes to our tax dollars – Poof! Gone!
I’m a card-carrying member of the Dave Ramsey cult, so I use a Ramsey Solutions Endorsed Local Provider for both my tax prep and our financial advisor. They go through a rigorous selection process and I know that they are in alignment with my debt-free philosophies and I don’t have to sit through the schpeel about how I should think about “investing” in a mortgage for the tax credit.
If you’ve got a mortgage, by all means, use the tax credit! But don’t take on an expensive mortgage for the tax credit – the math isn’t there.
Use a tax professional that specializes in your unique situation – for instance, if you have a lot of real estate, work with a tax advisor that has a passion for that niche . This year we switched from one ELP in our surrounding area to an ELP in our local area. I was just checking out our options, but it turns out that this lady is a gem! She works with small business owner year-round for book keeping, business planning, and growth. Since my husband and I both have a side hustle, this is a perfect fit.
The last step requires a little patience, and a decent technical set up. You’ll need a good scanner/copier and a computer and an external hard drive. Alternatively, if you want to go old school, you can use a copy machine or just opt out of this step.
If you are filing your own taxes, this step is only necessary if you want to get rid of the sacks of paper. If you are hiring someone, they will likely scan the documents and return them to you. Just ask and decide if you are comfortable leaving all of the documents with them. Stuff happens, and it’s best to have a copy or two.
With your manila folder at hand, and all of your paper work sorted and clipped by section in the tax organizer (download here) get about the business of creating an electronic copy of each document by section.
Store each section named by title on an external hard drive or on your computer. It’s a good idea back up all of your financial documents. I use a system that is stored under Docs > Finances > Taxes > Year. I keep all of the tax prep documents and an electronic copy of our federal and state returns in here along with the customized tax organizer template.
Once you have each section scanned and saved electronically, place all of your documents back inside the manila folder and pat yourself on the back for doing the hard work.
Step 4: Scan all of your documents to a pdf. Decide if you are going to file your taxes online yourself or if you will hire a tax professional to file your return for you. Take a nice hot bath tonight. Close your eyes, put your head back, and let it all go. You did it! You prepped your taxes and now you have a new system in place for next year where you won’t need to dread it – because that wasn’t so bad now was it?