In the middle of tax time in 2020 -- my 13th tax season as a financial organizer / daily money manager -- I find that working with a client to organize their tax documents and information can provide a great learning experience for both of us.*
“Tax time?” you ask. “Hasn’t that been put on
hold?" Yes, but while July 15 is the new April 15 in 2020, it doesn’t mean that the tax prep process has magically disappeared. In fact, if you have a refund or two coming, you should consult with your tax preparer about filing on the old schedule. That might also pertain to those who have been victims of tax-related identity theft.
No matter what your situation, here are a few tax time take-aways I have gleaned over the years that you may find helpful.
Get Organized
Tax time offers a great object lesson in the value of being organized. Lack of organization costs this time of year more than it seems to at any other time. For example: The cost of missed deductions (when receipts and statements are missing, a travel log is incomplete); the cost in time and mental well-being of trying to play “catch up” on organizing a year’s worth of financial activity in a very compressed time frame.
Take Stock
With tax statements spread out in front of you, you get a clear sense of how many different financial accounts you have. Would it make sense to consolidate investments into fewer institutions? Could that improve investment performance or reduce fees? Reduce the paper and mental clutter?
Tax Planning
Before throwing them in the file when the time comes, review (maybe with your trusted advisors) your 2019 returns. What can you do now to make filing taxes for 2020 better? Are you making the most of your deductions? Considering tax-favored investments? Taking advantage of the beneficial tax treatment of 529 plans and long-term care insurance premiums (in NY State), for example? Make the most of your accountant’s expertise and that of your financial advisor.
Free Up Your Spring
Does it always feel like tax time conflicts with planning your garden, going on vacation, preparing for Easter or Passover, celebrating a birthday or anniversary? Give yourself a treat by wrapping up your tax preparation early, leaving time for more enjoyable activities.
It’s Not Too Late
While we are well into 2020, it’s not too late to dust off those resolutions you made for this year. With tax related tasks taken care of, use that time instead to pick a few and make them happen this year.
The Positive Side of Deadlines
Maybe deadlines (like April 15 . . . or July 15) aren’t all bad. If having a deadline works for taxes, might it also help you get your other “must-do’s” completed? Is it worth a try?
No Need to Wait
One more thought: July 15 will eventually roll around, as will October 15 (if you filed for an extension). But why wait? Many people now have extra time on their hands and are home-bound. Your tax preparer may even be more available to you now. Commit to wrapping up your taxes now. After all, all or most of your information and documents should be available. Your reward will be a stress-free summer and fall when we are finally out of quarantine!
Be well!
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*Just a reminder that I do not prepare tax returns for clients, though I was trained as a volunteer tax preparer through the AARP / IRS tax prep program. I work closely with their tax preparers to be sure clients’ returns are accurate and ancillary tasks (like paying estimated taxes, gathering proof of deductible expenses, and more) are done.
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