5 Simple Ways to Get a Head Start on Tax Season

Nobody relishes the idea of preparing their annual income tax filing, but it’s something we all must do in order to avoid fines and jail time. We may end up giving a fair chunk of our earnings to the government each year, but we get to live in a country where we are granted unparalleled freedoms. And when you look at how much Canadians pay, 20-25% doesn’t seem so bad. In any case, you can at least lessen the burden of time you devote to your taxes come April by doing some prep work ahead of time. Here are just a few good ways to get a head start and save yourself the headache of putting together your tax filing in a single sitting.

  1. Look at last year’s return. A good place to begin when it comes to getting a head start on your tax filing for the year is to pull out last year’s return and take a look. This comprehensive document will remind of what you earned, spent, and wrote off before, as well as which documents you needed to include in your filing (there should be copies of everything that was sent to the IRS, or even originals if your tax prep specialist scanned the documents for e-filing purposes). Although your filing may change slightly from year to year, especially if you have a major transaction like switching jobs or selling property, you returns from previous years can serve as a quick reminder of what you need to collect in preparation for filing.

  2. Organize receipts. If you plan to claim deductions of any kind; for work expenses, charitable donations, or contributions to retirement accounts, just for example; you need to make sure that you have all of your receipts in order. Nothing will get you red-flagged for an audit by the IRS faster than deductions without any proof. Even then you might gain their attention if you have an overabundance of write-offs. But at least with all of your receipts in order you can get through an audit with no harm done, supposing there are no other problems.

  3. Enter data monthly. One of the best ways to prepare for tax season is by staying up-to-date with your bookkeeping throughout the year. All you really need to do is devote a few hours each month to entering all pertinent data pertaining to income, expenses, deductibles, and so on and you’ll save yourself the headache of having to do it all at once, not to mention the potential for things to slip through the cracks because you’ve forgotten about them over time.

  4. Collect needed paperwork. You’ll have to wait for certain documents to arrive (like your W-2 or 1099), but in the meantime you can start gathering other information your tax prep specialist or CPA is likely to request. If you contribute to a retirement account like a Roth IRA, for example, your accountant will need to know how much. You’ll also need to provide information on write-offs like mortgage interest. And of course, any additional income, say from the interest earned on CDs or cashing in stocks, will have to be noted and backed up with documentation, as well. Your tax accountant can probably provide you with a list of the documents you’ll need, but if you’ve done this song and dance before, you likely already have a fair notion of what you should gather.

  5. Make the switch to accounting software. When it comes to accounting and bookkeeping, you don’t necessarily need to hire a pro, especially if you’re willing to upgrade from paper ledgers and shoeboxes full of receipts to software like QuickBooks that lets you track your finances digitally and mobile apps like Expensify that store snapshots of receipts on the go and spit out reports for you later. You might still want to hire a service like Patrick Accounting & Tax Service or head to your local H&R Block for help with filing, especially if your taxes are complex. But with the right software you can make your job (and your accountant’s) a lot easier come tax season.