A:

You may one of the lucky ones to come out on top this tax season, but as you will likely agree, it does not mean that you should rest on your laurels. Instead, use the experience gained during this tax season as a guide for the things that you can do better for next tax season.
The following are some tips that can help to ensure you have a smooth 2007 tax season:

  • Design a filing system for all your receipts and tax documents. The shoebox system is not the most effective, but it can be a good back up for information you enter into a database. Your shoebox system can be as simple as maintaining separate envelopes for different types of receipts, e.g. medical, educational, travel, charitable donations and job-hunting expenses. Before you file those receipts away, be sure to enter the amount into your database. If you are not ready to invest in a ready-made accounting software, and you are not spreadsheet savvy, ask your tax preparer to design a spreadsheet file for you to help keep you organized. Designing such a program takes no more than 10 minutes for someone who is familiar with the process.
  • If you received a large tax-refund, consider decreasing your tax withholding percentage, which would increase the amount you receive on your paycheck. The increased take-home pay can be routed to your savings account, including retirement accounts, as an automatic deposit. Many employer and plan administrator websites host calculators that can help you determine how an increase in withholding tax would affect your take-home pay.
  • If you owed income taxes, consider whether you need to pay estimated taxes during the year so as to avoid any penalties that may be owed for underpayment of taxes. See IRS Publication 505 at www.irs.gov for assistance with determining whether you need to pay higher estimated taxes.
  • If you missed the deadline for liquidating stocks for which you wanted to write off losses for last year, make a note to yourself to sell those stocks before year-end. (To read more, see How do I avoid paying excess taxes on securities I have sold?)

Getting an early start will help you to avoid year-end and tax-filing period rush, and it will help you keep on track with your financial goals throughout the year.

If you feel you will be unable to file your tax return by the deadline, see Get A Six-Month Tax Extension.

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA

RELATED FAQS
  1. What is the difference between federal and state withholding tax?

    Discover whether you can file your taxes by yourself. The three main options for tax preparation are a tax professional, ... Read Answer >>
  2. How can I make sure I'm ready to file my taxes?

    Whether you file your return yourself, or have it done by a tax professional, you want to make sure you include all your ... Read Answer >>
  3. How can I lower my effective tax rate without lowering my income?

    Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning tax-free ... Read Answer >>
  4. How do I avoid paying excess taxes on securities I have sold?

    If you dispose of securities during the tax year, the profit or losses from the transaction are either capital gains or losses. ... Read Answer >>
  5. What aids will help me file my own tax return?

    Most of us will shy away from doing our own tax returns, especially if it involves reporting capital gains or losses, education ... Read Answer >>
  6. Will a 10-99 form make my taxes higher?

    My employer is not withholding taxes each pay day. Will this increase my taxes because they will give ... Read Answer >>
Related Articles
  1. Taxes

    Tips To Make Next Year’s Taxes Less Stressful

    You might be ready to put the stress of tax preparation behind you until next season, but ignoring your personal tax situation for 11 months of the year is what got you into this mess. Find out ...
  2. Taxes

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  3. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  4. Taxes

    Common Tax Mistakes To Avoid

    Find out what mistakes people often make on their returns, and how to avoid them on yours.
  5. Options & Futures

    7 Ways To Avoid Self-Employed Tax Penalties

    If you follow these methods for calculating estimated tax payments, you could minimize your chances of incurring penalties.
  6. Taxes

    4 Tax Tips For Unemployed Workers

    Solid tax planning is essential. Unemployment can cause changes in your tax bracket and result in different allowable tax deductions.
  7. Taxes

    Simple Last-Minute Tax Tips

    A little preparation and organization can take the stress out of last-minute tax filing.
  8. Taxes

    Should You File An Early Tax Return?

    When it comes to filing your taxes, it can often pay to wait until the deadline.
  9. Taxes

    Filing Your First Tax Return

    Tax time can be intimidating - but knowing these tips can ease the process and get you a hefty return.
  10. Taxes

    5 Rules To Follow If You Are Filing Taxes Yourself In 2013

    It is important to make sure that you cover all the bases when you decide to file without the financial expertise of a tax professional.
RELATED TERMS
  1. Tax Season

    The time period between January 1 and April 15 of each year in ...
  2. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  3. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  4. Net Of Tax

    An accounting figure that has been adjusted for the effects of ...
  5. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
  6. Withholding Allowance

    An allowance an individual claims on a W-4 Form. A withholding ...
Trading Center