8 Steps To A Stressful Tax Season

90371_5249I know some of you hate the “t” word. Probably most of you. There are few political topics as polarizing as taxes. Liberal or Conservative, NDP or Green Party, everyone despises the act of filing returns and paying taxes.

I came across a really good article over at Wise Bread on this subject. It talks about ways to guarantee an IRS audit, but these will just as easily work with our friends at Revenue Canada or whatever government tax agency you deal with in your country.

Here are a couple that stood out for me.

3. Self-Employed/Schedule C Filers

Small businesses are suspected of being especially creative with their expenses. Be careful if you take a home office deduction, have lost money for several years in a row, and prepare your returns yourself rather than use an accountant.

Although some people do get creative with their deductions, others have legitimately high expenses in some categories. If that’s the case, be that much more diligent about keeping accurate records and saving all your receipts.

5. Unreported Income

Be especially careful to report all your income. If you’ve received a 1099, so has the IRS and their computers will notice if they don’t match up.

The same is true for other sources of income. If your former spouse reports alimony paid and you don’t report receiving it, you’ve just painted a big bull’s-eye on your tax return.

The other big category here is tips. If you work in a bar or restaurant as a server of some type and don’t claim tips, that’s a big red flag. If you haven’t kept an accurate total, at least claim a reasonable percentage of your income. I’ve always been told 10%, and have used that for clients who didn’t keep track of their tips.

For your own protection, start tracking your tips this year.

You don’t need fancy software. Go to the dollar store, and buy a few pens and a notebook. Carry them with you to work and at the end of each shift, write down what you made in tips. At the end of each week or month, get a tally and write that down near the end of the notebook. It will make it so much easier to calculate that total next time you do your taxes.

Be sure to check out this article. It has a lot (well…8 to be exact) of great tips. Wise Bread always has great information about personal finances, so I would recommend bookmarking their site, or adding them to your news reader of choice.

8 Invitations to an IRS Tax Audit | Wise Bread.

Do you have any tax tips of your own? Let me know in the comments.