It’s only a month into the new year, and you’re probably still recovering from your holiday spending hangover or figuring out which of your New Year’s resolutions is going to have staying power in 2019. Although it’s important to set goals for the year and be mindful of your spending, another major financial milestone is already on the horizon: your taxes.
You might think that it’s too soon to start worrying about taxes, but I’m making the case as to why you should start preparing for your taxes right now. Especially if you’re a freelancer or a side hustler, the earlier you prepare for tax season, the better.
Here are the reasons why you should file your tax return early.
You Can Avoid Stressing About Deadlines
Leaving your tax preparation until the last minute is stressful but easily avoidable. Instead of fretting over whether you’ll have your taxes submitted on time, filing your taxes before the deadline means you won’t experience any of that deadline-induced stress, and you’ll get your refund earlier.
This year, my goal is to have my taxes ready to file on the first day that filing opens in my home country of Canada — which, last year, was Feb. 26. To help motivate me through the many nights of paperwork organizing in my future, I’ve already planned a splurge to reward myself for getting my taxes filed so early.
You Need Time to Track Down Lost Receipts
The sheer number of receipts for expenses can be mind-boggling, especially to small-business owners like myself. So, if you earned income on the side this year, it’s a smart idea to start organizing your income and expenses now.
Every year, I set out to be more organized with my expense tracking, and every year there are expenses for which I can’t find the receipts. In 2018, I made a special effort to take photos of all of my receipts, which has streamlined the process, but there are still one or two expenses that I’m going to spend some time tracking down. I might let these expenses go if I was under a time crunch, but since I’m preparing for my taxes early, I have time to find the receipts and claim them on my taxes.
You Need Time to Research Tax Credits and Deductions
If your financial situation has changed in the past year — for example, if you got married, bought a house, had a child or paid tuition — you might qualify for new tax credits or deductions. If you’re rushing to get your taxes filed at the last minute, you might not have time to determine which credits and deductions apply to your new situation, potentially resulting in a smaller tax refund.
By preparing for tax season now, you’ll have plenty of time to ensure you’ve applied for every available tax credit and deduction, guaranteeing the largest possible income tax refund and more money in your pocket.
You Need Time to Prepare for a Tax Bill
As a freelancer and side hustler, I’m mainly preparing for tax season now because there’s a very good chance that I’ll owe the government money. As a freelancer, I’m required to set money aside from every payment for taxes. Although I’ve done that diligently, it’s just an estimate, and there’s a chance I haven’t saved enough.
If this is the case, I want to make sure I give myself as much time as possible to save money for my tax bill before it’s due. Overdue outstanding payments are subject to late penalty fees, and I’m planning to avoid that.
A Little Preparation Now Relieves a Lot of Stress Later
Almost no one likes filing their taxes, but it’s a necessary evil. You can make tax season as enjoyable as possible by starting to prepare in January.
Begin by getting your income and expenses in order. Give yourself plenty of time to track down those errant receipts, and make sure you apply for every available tax credit, even if it means filling out extra paperwork. Set an early tax deadline for yourself, and — if you end up owing the government money — take that extra time to get your outstanding balance in order. With these simple steps, I’m planning a stress-free tax season.
Click through to find 30 ways to make tax season less scary.
More on Filing Your Taxes
- The Complete Guide to Filling Out Your W-4 Form
- TurboTax Free and Paid Options Review: File Accurate Returns Quickly
- How to Avoid Paying Taxes Legally — and the 4 Craziest Ways People Have Done It
- Watch: Why You Shouldn’t Assume You’re Getting a Tax Refund
We make money easy. Get weekly email updates, including expert advice to help you Live Richer™.