When taxes are involved, why do you procrastinate?
I do not like doing my income taxes, 1040 what?!…solution: delegate, pay someone else to pull together the information needed for your return and pay someone to prepare your return
I do not like preparing the information to give to someone to do my taxes!…solution: delegate, pay someone to get your financial papers/information organized…paper, digital, all of it
I do not have enough money to pay someone to help me prepare for taxes!…solution: ask your spouse or someone trusted to do it for you or come up with a plan to stop procrastinating, see ideas below
I do not like to plan!…solution: if you do not want to do your own taxes or prepare for them or pay pay someone else or plan or take responsibility then it is time to realize you are an adult and this is something you have to do. Consider filing an extension which gives you 6 extra months, extending the deadline to Oct 15th. Please note, you still have to pay by April 15th
I do not have enough time to do any of this! Then buy someone else’s time especially if you have trouble concentrating. Hire someone with the appropriate skill set to help. If you do not have enough money, try trading services. We all have to set priorities with our time. If you health or some exception keeps you from this, you might want to call the IRS to discuss options.
I do not have enough money to pay my taxes!…file your return on time without payment. If you are not going to pay for a long time (over a month or so), call the IRS to discuss. You will still be charged penalties but your call will be noted in their files.
There are many tasks we do not like to do but have to, taxes are no different. Pick what works for you:
Delegate – this is my absolute, number one suggestion. Hire someone (similar to me) to come to your home and get these tasks done for you. I suggest hiring someone with (even limited) tax knowledge. Expect to pay by the hour, $40 to $90/hour. More than $100/hour means they should be preparing your return.
(for the DIY crowd) Develop a task/checklist – Turbotax offers a good checklist as a starting point for the average taxpayer. Generally, your taxes are fairly consistent from year to year (until you have life events: birth of child, marriage, death, divorce) so you know what your tax accountant will want. Make a list, as you received the information, stack it together, then organize the stack a more or so before tax day and give to your tax accountant.
Set appointments with yourself – put appointments on your calendar (by yourself) to work on your taxes. If you continually miss them, you might need to delegate. Realize, tax preparation is not in your thinking style and your efforts could be used in a more meaningful manner.
Set appointments with paid professionals – force yourself into a deadline by creating accountability. Your tax accountant will expect you to bring the needed information.
Understand your taxes – your taxes are not as hard as they seem. There are many tax rules but most of them do not apply the average individual. Have you taxes prepared by a professional and understand what they did. With that understanding, narrow down the information and paperwork you need to maintain. You might be doing something (like keeping every receipt) because someone told you to when in reality, your tax accountant only uses a small part of the information you provide.
Force yourself – get paperwork and information organized now, not later…commit to this goal, if you stray, set-up consequences for yourself…”if I miss my goal, I will hire someone to do it for me”. Understand why you procrastinate so you can change accordingly.
Change your perspective – being scared or angry about your taxes is not getting you anywhere, equivalent to beating your head against a wall even when you know it hurts. Accept the task and be angry about something else.
I will say one more time – if you continue to procrastinate and do not like it then hire someone to help you. The tax deadline is not going to change but you can.
Here we are, at the deadline for individual taxpayers…and your stress level is high (extremely) because you procrastinated. What can you do?
It is the NIGHT BEFORE and you are unorganized, yikes!
You need to extend the deadline for filing form 1040 (see link for instructions) which means your return is not due for 6 months (October) but payments must be made by 4/18/16. You can make a payment without providing a return but you can not provide a return without paying. Not paying might result in penalties which are pricey. Use form 4868 to extend your deadline.
How much do you pay? If you are an employee and completed a W-4 when you were hired, you are probably okay, however, other forms of income could result in additional taxes due. Do what you can and call a tax accountant ASAP. Every day you do not pay counts…it adds up.
Filed an extension, I can relax, right?
Yes, but not too much. I assume this is a matter of procrastination so do not put yourself in the same situation again. Start right away, in this order:
Find documents related to INCOME –
Find all papers associated with INCOME earned: If you earned the income from a company, they are required to provide Form 1099 or W-2 (must have been post marked 1/31/16). If you are an independent contractor, you will receive a 1099 stating how much you earned; if you are an employee, you will receive a W-2 (generally, you can get the same information from your last paycheck or the one closest to 12/31/15). One exception, 1099’s are only required if you earned $600 or less. FYI, your employer will send their copy to the IRS so there is no getting around this. If you lose it, call your employer and request another copy.
Find remaining documents: Many sources of income are reported on form 1099 followed by the type: taxable interest earned on investment accounts is reported on “1099int”, dividends on “1099div”, retirement distribution “1099-R”, and many others, the catch all is “1099MISC”. They come in the mail or e-mail starting early February through March.
There are other forms with odd names such as, your share in a partnership is reported on a K-1. Be aware, if you earned money from something, there is a good chance a form has been issued to you.
Self-employment INCOME This calculation is left to you (or your accountant). Accuracy is important. Do not commit fraud by hiding income (if your clients paid with cash, include it). If you get caught, it will be ugly. Worst case, go through your bank statements and add up the deposits that represent income (please tell me you deposited client payments and/or have a merchant account, if not, find anything…any support that documents income).
Find documents related to DEDUCTIONS –
Some deductions will be mailed to you by the company you pay. For example, mortgage interest paid is reported on form 1098. All forms should be received in the first few months of the year.
Finding deductions are harder because you have to calculate them yourself. The first problem – learning what are allowable deductions. If you are not comfortable figuring this out on your own (there are an endless books, blogs, articles, etc) then hire a tax accountant, at least for one year. Take time to understand your return. Maybe you can do 2016 which might save hundreds in accounting fees. I have yet to see a tax accountant charge less than $250/return, even for easy returns. I do mine with Turbo Tax, but be cautioned, my return is easy because it has been the same for many years and my finances (and thinking) are organized.
What happens when you miss a deduction –you are paying more taxes than you need to. A perfect reason to hire a tax accountant rather than miss deductions. Self-employed individuals will benefit the most. If a missed deduction is significant, amend your return… a good reason to hire an accountant.
What else –
The complexity and quantity of tax laws will make your head spin. Fortunately, a lot of them do not apply to the average individual. If you are unsure, go to a tax expert. Get your stuff pulled together, at least semi-organized, so they can understand. FYI – for my clients, I prepare the information that is sent to their tax accountant. My fee is much less than most tax accountants. Believe me, disorganization will result in higher tax preparation fees.
General rules – if you are going to be audited, the IRS has 3 years to let you know. However, the rule is for individuals to keep their returns and support for 7 years. Because I am a nerd, I have every return I ever filed (but not the support)…this is not necessary unless you like to reminisce, like me.
I like this post regarding organization for tax time official source. This post is for the reformed procrastinator:
You live with a hurricane, at least that is what it feels like when you live with unorganized teenagers. You are their maid, cook, secretary, therapist and driver. If their head were not attached, they would lose it. Seems like, this is normal for most families. To your child’s credit, they have a massive amount of changes happening in their bodies which causes chaos. Good news, they will grow and can develop organizational skills at any point in their life.
The therapist in me asks: As their parent, are you helping or hindering the development of organizational skills?
(extreme) I keep them organized, constantly….even their thoughts
(my recommendation) Organization is divided between us…sometimes they perform tasks differently than I suggest but that is okay
(extreme) I am so unorganized, my child manages our clutter
Hopefully, you are not either of the extremes but some place in the middle. The point is, to consider your child’s perspective. If you do everything for them, how will they learn? When they are on their own, won’t they be better able to manage if they develop skills? We go to such lengths to teach them Math, Science and English but what about common sense?
Unless your child has issues with ADHD or other issues, the average child should be able to wash a load of laundry, make a sandwich, spend within their budget (for that matter, recognize what a budget is), find locations by themselves, make their own haircut appointment, and last but not least, make decisions regarding stuff…what stuff should be kept vs eliminated.
I am not saying this is easily taught (interesting article The Messy Room: Symbol of the Adolescent Age) but can and should be done not only before they leave for college but as they continue to grow. You should feel like you are spending a lifetime teaching them common sense skills. Often, common sense involves organization.
But, it is almost time for them to leave, what do I do?
- Sort so you can get rid of stuff – I recommend that your child go through all their stuff, without you, if possible. Ask them to get rid of anything that serves no purpose, does not fit, or the does not interest them. Sorting like items helps the decision making process visit their website. You want as few items as possible to remain for two reasons: they can not take much with them and you do not want to deal with everything left behind.
- Teach them decision making skills through the process – for example, parting with the hundreds of stuffed animals they have had since birth may seem unfathomable but this is a teaching moment. Ask them to narrow down to a few, only the most important stay. All the others will be given away so another child can enjoy them. NOW repeat this process with everything they call their own. Need advice? Get help from Julie Morgenstern’s Organizing from the Inside Out for Teens. Decision making is a skill that will make them successful.
- Have a place for everything – not only does this apply to their room but the entire house, you are their role model. Just as important, all who live in this home should know were the stuff belongs. Your teenager should be able to clean their room easily if they know where stuff resides. Will they do it? That is a different kind of question.
- Decide what they will take to college and set aside – it is never too soon to start packing (guide: Off-to-College Checklist). The sooner you start, the sooner you will realize what they still need and have to buy. All the more reason for you to organize the entire house, give them what you already have instead of buying more and more and more.
- When you get there, fill-in the blanks – no matter how well you organize and pack, I guarantee, you will need to make a final run/order to Target/Amazon for missing items. It is okay, you are going to forget stuff.