Tax season can be stressful, but it doesn’t have to be. By starting early and breaking the tax preparation process down into a series of simple tasks, you can save time and money and manage both your finances and your sanity.
Credit card accounts can be helpful in providing a record of your expenses and maybe even a way to access tax software.
“From a mental health perspective, the earlier you start preparing your tax return, the better,” says Dana Miranda.
Miranda is a Certified Personal Finance Educator® (CEPF®) and founder of the popular financial wellness resource Healthy Rich. Her goal is to help people take care of their finances while taking care of themselves.
With that in mind, here are Miranda’s tips on how to maintain your sanity this tax season — and what you can do in December to prepare for April.
How many tax returns can you file in December?
If you want to start doing your taxes in December, think in terms of preparation, not completion.
“December could be a challenge because you might not get some of the key documents you need to file a tax return by January 31,” says Miranda. “But now can be a good time to read through your tax forms and make a checklist of the information you need to fill them out.”
Form 1040, for example, requires you to provide basic identifying information for yourself, your spouse (if you are married and filing jointly), and any dependents. Many people will be able to fill out this information immediately, even if they are still waiting for their W-2 or 1099 forms.
You can also decide if you want to do your taxes on your own, use one of today’s best tax software programs, or work with a tax preparer or CPA. Most software and tax preparers will be able to provide a list of the information you need to collect for the 2022 tax season, from IRA contributions to charitable deductions.
This is how Miranda suggests starting the tax preparation process. “Make a list of everything you’ll need before you start filling anything out,” she says. If the only thing you do in December is complete this list, you’ll be well on your way to a low-stress, mentally healthy tax season after the New Year.
Do you have to file your taxes yourself or ask for help?
Not sure if you should file your taxes on your own or work with a tax professional? Here are some expert tips.
“Start with the IRS free file options if you earned less than $73,000,” Miranda says. “Free paper forms are also usually available at the library.” If all of your income comes from one employer and you’re considering taking advantage of the standard deduction, filing your taxes yourself might be a smart move — for yourself and for your sanity.
“If your finances are simple, it may be less stressful to fill out the forms on your own than to answer a series of questions through an online tax preparation service that tries to outclass you. and pay extra,” says Miranda.
If you think you can manage it yourself, some basic software can help you. Check to see if your credit card has a promotional offer for tax preparation software. Amex, for example, is offering 15% off TurboTax for SkyMiles members through December 31, 2022.
What if your taxes were more complicated? “If you own a home, run a business, donate a lot to charity, or anything else that adds complexity to your financial situation, filing a tax return is likely to be complicated and frustrating,” says Miranda. “A local or online tax preparer can relieve you with a range of prices to meet most people’s needs.”
How can you prepare for a mentally healthy tax season?
If you want to prevent anxiety from jeopardizing your tax return preparation, start by remembering that the IRS makes it relatively easy to deal with most tax return stress.
“There are processes for dealing with all the scary stuff,” Miranda says. “You can request an extension to file your return after tax day, file a correction if you made a mistake, set up payment plans if you owe money, submit corrections if you are audited , etc.”
Then go back to that checklist you made and start collecting the relevant documents. “Organizing your tax information ahead of time gives you time to dig up all the paperwork you need and avoid feeling scrambled in April,” says Miranda.
If you are unable to complete this task in December, don’t worry. “For many people, December is one of the busiest months of the year!”
Finally, remember that the money you pay in taxes goes directly to improving people’s lives, including your own. “If you’re frustrated about paying taxes, try adjusting that mindset,” Miranda says.
Your taxes fund everything from public schools to medical research, not to mention Social Security, Medicare and other essential services. By reframing the process of paying taxes as an opportunity to contribute to the functioning of a society, you can prepare for tax season in a position of gratitude.
What if your tax refund is lower than normal?
One of the biggest stresses associated with tax season is getting a lower-than-expected tax refund. If your refund is lower than you anticipated, consider adjusting the deductions that come out of your paycheck next year.
By allowing your employer to withhold more tax from your wages now, you may receive a higher tax refund later, and vice versa.
What can you do in December to save on your taxes?
Looking at your credit card statements for the year can be a good way to check how much you’ve spent, especially if you run a home-based business and use a dedicated card for those expenses.
In most cases, people can reduce their tax burden through deductions and credits. And while many year-end tax-saving tips focus on increasing your potential deductions, it may be best to start by claiming your potential credits.
“Make sure you’ve claimed all the tax credits you’re entitled to, because it’s money for every dollar in your pocket,” says Miranda. “Consider earned income tax credit, child tax credits, savers tax credit, etc.”
When it comes to deductions, keep in mind that many tax deductions require you to pay upfront, especially if you’re making tax-deductible purchases for your small business. The amount you can deduct is often less than the purchase cost, so be careful not to spend more than you can afford just to save a little on your taxes.
“I don’t encourage people to make financial choices just for the tax deduction, because those require you to take money out of your pocket and they don’t pay you back one at a time,” Miranda says. “The benefit of saving money is probably imperceptible if you have a low income.”
If you buy tax-deductible items on credit cards and have a balance, the interest you may end up paying could reduce the tax benefit even further.
Should you take the standard deduction or itemize?
Many taxpayers automatically opt for the standard deduction – and in many cases the standard deduction is the better choice. However, you may want to use part of December to do the math on whether to itemize your deductions.
Bankrate has a guide to help you decide between standard deduction and itemized deductions, as well as a tax calculator that can help you work out the numbers. Removing that particular item from your tax to-do list before the end of the year can save you a lot of stress next spring.
The bottom line
If you want to have a mentally healthy tax season next year, start by gathering your tax documents in December. Even though you probably won’t be able to file your taxes until January 31st, you can still decide whether you will use a tax preparation service, whether you will benefit from the standard deduction and whether you take advantage of any potential tax credits that may help you reduce your tax burden or increase your refund.
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