When it comes to adulting, tax season tops the list for one of life’s most daunting financial obligations. No matter what your financial situation is, getting your taxes done correctly is crucial. I’m here to tell you that it doesn’t have to be scary or intimidating, as long as you stay proactive. Now is the time to start thinking about what you need to do BEFORE the deadline. Even if you’ve been filing your taxes for years, there are some pretty common questions that come up again and again. Let’s look at tax season broken down so you have more knowledge and can get the most out of the situation (without losing any sleep).
Tax Season Broken Down: What You Need to Know
For many people, the focus of tax season comes down to how much money you’ll be getting back in your refund; and for some, it’s a pretty sizable chunk. For others, tax season means paying that sizable chunk instead of receiving it. Either way, it’s important to know what to do both before and after you do your taxes every year. Keep reading for the answers to some of the most common tax season questions I’m asked.
Are refunds good or bad?
First up, let’s talk about refunds. For the everyday woman, if you’re getting a refund, it means you’ve loaned the government money interest-free. We don’t ever really want to owe taxes, but a big refund isn’t really what we want either. We could be saving that money into an interest-earning account! Breaking even with the IRS is most ideal in most circumstances.
What does that mean for you? If you’re an employee, this is where the withholdings on your W-4 come into play. If you usually have a big refund coming but would rather get the most out of your paycheck throughout the year by breaking even, the best way to decrease your withholdings is by increasing your personal allowances.
It’s too late to make these changes to this tax season (for the year 2021), but tax season comes every year. We are still in Q1 of 2022 and you can begin the new tax year with an adjustment to make sure that you break even next year. You can easily download the W-4 form from the IRS website or ask your employer for a copy. And don’t be afraid to reach out to me if you have more questions in this area!
What are the important deadlines?
One of the important aspects of tax season broken down is the dates. Tax Day is typically April 15th each year, unless the day falls on a holiday or weekend – so this year, the deadline to submit 2021 tax returns or an extension to file and pay tax is Monday, April 18th, 2022. Due to the pandemic, tax filing deadlines were extended, but this year we are back on track for mid-April. If you need an extension, you must file for it by April 18th, and the deadline for an approved extension is October 15th. Meaning you can’t extend your tax deadline again after October and failure-to-file- penalties will be added if you don’t pay by then.
How can I find a good tax planner?
Finding a good tax planner is best done before most people even start thinking about taxes. By the time April comes around, most of the good individual tax planners are already busy with their client load. That said, H&R Block, and online tax planning software like TurboTax are good options for simple tax preparation and filing.
Plan forward for next year if a more robust, personal tax planner is on your To-Do list. The best time of the year to establish a relationship with a tax preparer is May through August – they have caught up from the April deadline and aren’t super busy with fall deadlines yet. Ask friends and family for referrals and interviews to determine fit BEFORE they are too busy to take on new clients!
What’s the difference between a CPA and a Tax preparer?
Certified Public Accountants (CPAs) and tax preparers can both help you organize and file your tax return, but learning more about the difference can help you decide which direction best fits your needs. It all comes down to licensure, education, and credentials – which means that there will be a definite price difference when it comes to hiring their services. Tax preparers aren’t required to complete a college degree, but depending on the type of tax preparer you hire, their position may still require a set of various qualifications.
There are three types of non-accountant tax preparers:
- Annual Filing Season Program participants
- PTIN holders
- Enrolled agents
Another important difference between CPAs and non-CPA tax preparers is that most tax preparers cannot offer you representation if you’re audited by the IRS, but CPAs are qualified to legally back you up if you were to run into any issues. Depending on how complex your tax returns are (especially if you have your own business), hiring a CPA may be a worthwhile expense.
The bottom line on tax season
The number one thing to remember about tax season broken down is to stay as prepared as you can – and that starts well before it’s time to hit that “file now” button or sign off on papers from your expert. Set yourself up for success by keeping those important documents organized throughout the year.
It’s no secret that tax season can be pretty confusing, even for experienced filers. We don’t want to overpay or make a mistake. That’s why experts in this area are so valuable for business owners and entrepreneurs.
If you’re looking for a supportive group of women to help you navigate tax season and achieve your money goals this year, join mine. If you are looking for help getting your $hit together or learning how to invest your money going forward, sign up for my next GIT Elevated Money Course today!