Tax returns can make grown men and women weep with frustration. There is something about dealing with the IRS that inspires fear, no matter how financially savvy you are, so when it is time to file another tax return, you are forgiven for wishing it would all go away. The problem is that taxes are an inevitable part of life. You cannot avoid taxes any more than you can avoid the Grim Reaper.
You can try, of course, but the IRS has a nasty habit of tracking down tax avoiders and throwing the book at them. Since filing a tax return is unavoidable, your only option is to make the process as stress-free as possible.
Hire a Tax Accountant
The most obvious way to cut down on tax preparation stress is to hire a tax accountant to handle it all for you. Preparing tax returns and dealing with the IRS is a tax accountant’s bread and butter. Many of them are former employees of the IRS, so they understand how the system works and are well qualified to help you out if things go wrong. If you do go down this route, make sure you hire an experienced tax accountant.
A Certified Public Accountant (CPA) must be state licensed. In addition, if you are seeking tax assistance, you need someone who has plenty of experience in this field, so check their references and if possible, ask for a personal recommendation.
Cost is a Mitigating Factor
Since cost is a factor for many sole traders, especially those who are just starting out and working from home, it is understandable that you would rather do your own tax returns to save money. There is no reason why you can’t file your own tax return online via the IRS.gov website. However, in order to make the process painless, you need to be organized.
No matter how large or small your business is, you need an organized accounting system. Some entrepreneurs begin with a simple spreadsheet system, but as time goes on, this will become less effective. A bespoke accounting software package is a far better solution, as it will produce the figures you need for your tax return in just a few clicks. There are plenty of free accounting software solutions out there but read the reviews first, and if you elect to use an accountant, ask them which system they recommend.
An accounting system is only as good as the information you input. Try to be organized with your paperwork and store all receipts, invoices and IRS paperwork. The more information you have to hand, the better, especially if the IRS audits you.
Be methodical and update your accounts as often as possible. The longer you wait to update your accounts, the less likely you are to remember key details about a client payment or a late invoice. You are more likely to forget to include expense payments and receipts, which could see you missing out on valuable tax relief.