• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Ask Neal a Question
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

How to Prepare for Income Tax Season

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

Do you hate feeling rushed? I certainly do. Well… if you procrastinate during income tax season, you’re not only going to have to finish things up at the last minute. You also run the risk of making mistakes. And if that happens you’ll have to deal with stiff tax penalties as well. And if you need more convincing to get your tax return game on, consider IRS audit red flags. Filing your tax return on time is one way to reduce that risk. Let’s get income tax crack-a-lackin’.

Schedule It

Don’t think about it anymore. Open up your calendar and schedule the earliest possible time to devote to getting your documents in order. During that time, don’t let anything interrupt you.  And while your at it, make sure you take advantage of every tax saving move before year end.  Put a note in your calendar so you consider these maneuvers in October, November or at the very latest December.

Realize that once you start putting your papers in order you may discover that you are missing some key data. That’s why you need to start preparing for tax season right now. Really focus on this.

1099’s

If you paid someone $600 or more during the year, you must issue them a 1099*. This goes for independent contractors such as lawyers, accountants, bookkeepers, computer consultants etc. The only time you don’t have to send out a 1099 is if:

  1. The recipient is a corporation.
  2. You included the payment in a W-2.
  3. You paid for a tangible product.
  4. The total payments are for less than $600.

The IRS says that you must send out your 1099’s by February 1st so get on this – pronto.

Let’s talk about the 1099’s you need to include in your own tax return. If you’ve received $600 from someone and aren’t exempt, you must include the 1099 form with your tax return.

Have you received all your 1099s? Are you missing any? If you’ve been using software to track your income and expenses this will be easy to know. If you don’t use software, look at last year’s return. It might provide clues on 1099’s that you are missing this year.

If you are missing one or more 1099, contact the payor immediately. Make sure they have your most current contact information. If possible, download the document rather than wait for it to come in the mail.

Other Documents

You need statements from your banks, brokerages, mortgage companies, etc. Do you have them all? If not, get on the horn and take care of this.

Did you donate any tangible goods to charities? If so, gather the receipts that reflect this too.

Note – while we’re on the topic of documentation……you should definitely keep your tax records far longer than even the IRS tells you.  Besides helping you prove you filled correctly, your returns have many more uses.

Tax Planner

If you don’t use a tax preparer, you hopefully use a software package and that program most likely will have its own planner included. Start working down the list now.

If you use a CPA to complete your tax return, ask her to send you a tax planner ASAP. This document will spell out exactly what information your CPA needs.

My suggestion is to make every effort to fill this form out so completely that you don’t have to actually sit down with your CPA this year. Why?

Because your CPA’s time is at a premium during tax season. And if you eat some of that precious time up, you’re going to pay for it.

You will absolutely save money if you complete your tax planner so well that your CPA doesn’t need to sit down with you. If you have a question or two, send your CPA an email. But do whatever you can to avoid the need for a face to face meeting if possible. Your CPA will appreciate it and you’ll love the money you save.

I learned the hard way that the best way to prepare for tax season is to use spending tracking software and keep it up to date throughout the year.

For years I used to fill up shoe boxes with receipts and statements. Then, during tax season it took me weeks just to get ready to do my tax returns. No more.

Now I use QuickBooks for my business and YNAB for my personal use. They each have their pros and cons. Regardless of which program you use, it will be much easier for you come tax time if you track your data on an ongoing basis rather than needing to reconstruct your financial life during tax season.

How do you prepare for tax season? What works best? What needs to be improved?

http://www.irs.gov/pub/irs-pdf/f1099msc.pdf

 

Tweet
Pin1
Share6

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Comments

  1. Tiffany says

    February 4, 2013 at 1:05 PM

    Neal we actually do the typical spreadsheet for expenses, etc. My husband is self-employed so it helps us to track everything as well. I have it set up just like our CPA prefers so it’s simple and she knows everything on there – plus she gets our receipts, etc. Jess is in the ag business (cowboys for a living) so we have a ton of stuff to keep track of!

    Reply
    • Neal Frankle says

      February 6, 2013 at 11:43 AM

      Great. Sounds like you are doing a great job!

      Reply
  2. Neal Frankle says

    January 29, 2013 at 10:19 AM

    Christian, Sounds like you really have a great system. Nice…..

    Reply
  3. Christian L. says

    January 29, 2013 at 9:40 AM

    Neal,
    I get my tax documents from last year just as a reminder of what I need. Then I get my W2s in order. I used to freelance and get a 1099 too, but not anymore. My retirement savings documentation (401(k) and IRA) and charitable donations paperwork come in the mail and I set those aside as well.

    With my Social Security card, ID and paperwork together I go to a free tax service at the nearby university. They walk me through the filing process on TurboTax. They send me off with what I either owe or receive. It’s a streamlined, simple process!

    -Christian L. @ Smart Military Money

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a CERTIFIED FINANCIAL PLANNER™ Professional with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2022 All Rights Reserved