Here at S.H. Block Tax Services, we look forward all year to National Tax Day on April 15. However, we recognize that most people’s stress levels steadily rise in the weeks leading up to tax-filing time and peak on April 15. In fact, a 2012 study analyzed 30 years of data and found that auto accidents spike 6% on Tax Day.
We’re not here to pass judgment, but we can say from decades of experience that many people’s tax-time stress is self-inflicted. Often, easing the pain of tax season is a matter of getting rid of bad habits and replacing them with healthy and constructive ones.
To help you cut down on unnecessary tax-time headaches, we’ve created a list of four things you should never do on Tax Day. For each entry on the list, we’ve provided a good habit you can use to replace the bad one. If you use this list to reshape your tax preparation and filing habits, you’ll never have to dread the calendar march toward April 15 again.
Don’t: Wait Until the Last Minute to Do Your Taxes
To be human is to procrastinate. Everyone, at some point, puts off things they don’t want to do for another day. But in many cases, procrastination becomes a vicious cycle: the task we put off becomes stressful and unenjoyable because we put it off so long and crammed the work in at the last minute. Next time, we dread it even more and procrastinate worse — and so on.
The best way to break your tax preparation process free from this cycle is to divide the larger task of preparing and filing taxes down into smaller steps that you can do over the course of several sittings. There’s no need to do your taxes in one marathon session; in fact, doing so will fatigue you and make you much more prone to mistakes.
Instead, tackle the different steps of tax preparation one at a time: one session for organizing documents, one session for claiming income, one session for deductions, and so on. Each session only needs to be an hour or two, and you can tackle them over the course of a month or more if you get started early. Don’t forget a final session for double-checking everything.
If your taxes are complex and even breaking them down into smaller tasks feels daunting, consider getting help from an experienced tax professional. S.H. Block is here to help, and the professionals on our team can handle even the most complicated and confusing tax situations.
Do: File for an Extension If You Need One
If your taxes are complex and it’s too late to give yourself enough time to do them at a leisurely pace, don’t panic. Every taxpayer is entitled to an automatic six-month extension on filing their taxes. The easiest way to claim this extension is to visit the Free File page at IRS.gov and file online. You can also fill out Form 4868 and mail it into the IRS.
Keep in mind that even if you file for an extension, you still have to pay any taxes owed by April 15. So how can you pay your taxes if you haven’t prepared your return yet? You’ll need to estimate your tax liability as best you can. If there’s any uncertainty, err on the side of overpaying since underpaying can lead to penalties and additional liability.
RELATED BLOG ARTICLE: Use These 3 Tips to Avoid Estimated Tax Penalties
Don’t: Avoid Filing Because You Can’t Pay Your Taxes
Let’s say you’re in the worst-case scenario: you know you’re going to owe the IRS this year, but you don’t have the money to pay what you owe on April 15. While the stress and frustration of this situation can tempt you to put off even filing, it’s always better to file your taxes on time — no matter how much you owe or how far away you are from being able to pay on time.
The IRS levies separate penalties for failing to file on time and failing to pay on time, which makes failing to file an especially bad decision. So, if you opt for the head-in-the-sand approach and avoid filing, you’ll get hit with both penalties, and you’ll create even more tax liability for yourself in the process.
Do: File by Tax Day and Then Explore Options for Tax Resolution
If you’re struggling to pay the full amount you owe by April 15, the IRS offers several options that can make your situation manageable. Most people who owe $50,000 or less can set up a monthly payment agreement with help from a tax professional. This agreement will allow you to pay off your tax liability over a period of up to 72 months.
If your tax liability is significant and you don’t believe you can reasonably pay the entire amount, you can request an offer in compromise from the IRS. An offer in compromise (OIC) is an agreement between you and the IRS that lets you settle your tax liability for less than the full amount owed. However, don’t expect an OIC to magically wipe away your tax debt; the IRS will still attempt to collect as much as possible, and they won’t write off any of your debt unless you can prove that there’s no way you can reasonably pay the full amount.
For more information about offers in compromise, read our blog article on the best tactics to get the IRS to accept an OIC.
RELATED BLOG ARTICLE: How to Get the IRS to Accept Your Offer in Compromise
Don’t: Fill Out a Tax Return With False Information
Of all the tax mistakes you can make, purposely filling out your tax return with false information is the worst. If you knowingly put false information on your tax return, you’re committing a crime (a felony, in fact), and there’s a good chance the IRS will investigate you and catch you. The consequences of committing tax fraud can include massive fines and even prison time.
Some people file falsified tax returns out of greed, but others commit tax fraud because they’re afraid they won’t be able to pay what they owe if they file truthfully. However bad you think your tax situation is, we can promise you two things based on our decades of tax resolution experience: first, there is always a lawful way to resolve your tax liability; and second, no matter how bad you think your situation is now, the consequences of filing a falsified return will be much, much worse.
Do: Prepare Your Tax Return Truthfully and Rigorously
Even if you can’t pay your tax liability on time, you should file a truthful and accurate return on time (or file for a six-month extension on time). As we discussed earlier, the IRS offers options that can help you repay your tax liability over time and possibly for less than the full amount owed. No matter how much you owe, filing truthfully and confronting your tax liability is better than living in fear of an IRS investigation and potential criminal consequences for fraud.
RELATED BLOG ARTICLE: 5 Common Tax Myths Debunked
Don’t: Throw Away Receipts and Documentation After Filing
We get it: after finally filing a complicated and stressful tax return, nothing sounds better than packing last year’s financial records in a box, “filing” them in the nearest dumpster, and never thinking about them again.
However, it’s best to leave this scene in your daydreams. If the IRS selects you for an audit, you’ll need to produce all the relevant financial records that went into preparing and filing your return. According to the IRS’ official guidelines for taxpayers, you must keep all relevant financial records for at least three years from the date you filed your original return or two years from the date you paid taxes owed, whichever is later. To be on the safe side, we recommend keeping W-2s, receipts for charitable donations, and other important financial records for seven years after filing.
Do: Organize Your Tax Documents and Store Them in a Secure Location
Although it’s important to save your financial records, they’re full of sensitive information that identity thieves would love to obtain, so it’s important to keep them secure. And don’t just gather your financial records by the armload and dump them in a crate, either; if you do get audited, putting everything back together after storing your records haphazardly will only add to your stress.
Ultimately, you’ll need to come up with an organizational system that makes sense for you. As an example, however, you could:
- Get manila folders for each tax year, write the tax year on the outside, and place all the relevant financial records in the folder.
- Organize within the folder using envelopes. Dedicate one envelope to W-2s, one for charitable donation receipts, one for receipts from business expenses, and so on.
Even better than keeping all your records in physical folders is turning them into digital assets and storing them online. If you’re a client of S.H. Block, you’ve already got a leg up — you can use the storage feature of our free client portal to help you stay organized!
As for your tax returns themselves, the short answer for when you can throw those out is “never.” The easiest way to store tax returns forever is to maintain digital PDF copies of them on a thumb drive, but a decent-sized file folder or two — kept in a safe place — should be enough to handle your 1040s.
S.H. Block Offers Free Consultations for All Your Tax Needs
If your tax situation feels overwhelming or confusing, there’s no need to try and solve all your problems alone or all at once. S.H. Block Tax Services is here to help. To schedule your free initial consultation, please call us at (410) 872-8376 or complete this brief form.
We have decades of experience dealing with tax-related legal issues, and we’ve earned an A+ rating with the Better Business Bureau after helping thousands of taxpayers eliminate their debt and get back into compliance with the IRS and the State of Maryland. We offer free, no-obligation consultations, so please reach out today!
Sifferlin, A. (2012, April 11). Tax Day hazard: Fatal crashes increase on April 15. Time. Retrieved from http://healthland.time.com/2012/04/11/tax-day-hazard-fatal-crashes-increase-on-deadline-day/
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