If you’re feeling stressed over taxes at this time of year — then this article is for you. Because I want to help you get over the tax time flutters and on to enjoying the months ahead for profit making!
Here’s what I hear, things like this: “I haven’t done my taxes for three years.” “I’m terrified every year at tax time.” “Taxes are so confusing, I just get overwhelmed and put off dealing with any of it!” Yikes, that’s enough to slow you down and dampen your incentive. Let’s get past this!
I’m here to help you bust past fear and confusion and get on with life. You CAN do this!” Let’s get busy on this one.
When you do your taxes, you move out of the past and into the future. It can be that great feeling of cleaning out your garage or your closet. When you get it done, you know where you stand, feel organized and you are ready for full speed ahead.
A Walk in Her Shoes
I’ve devoted my career to helping women plan their financial lives, and first things first — I’ve noticed that many women need to start with getting their taxes up to date. Life situations such as divorce, health, and others can be a bump in the road that throws women off track, and behind in taxes. This is common, and if it is you, you can find the help you need.
I’ve seen women get very anxious and derailed over taxes. I worked with a woman who put off filing her taxes for more than three years. When I met with her, here was her story. She was still grieving over the end of her marriage. Truthfully, she said, “I just couldn’t face filing as a single person.” I felt compassion for her. Life changes are tough.
But, then we tackled the problem together. I let her know that this was one part of the process and now the next part was to move forward. I was there to help her by assisting her to plan to take one step at a time. She began to see that cleaning up the past years now was her time to move forward into a stronger future.
Life had more ahead for her. When her taxes were finished and filed, it turned out that she was owed refunds for all of the years she had not filed. By completing the steps to getting her life in order, she moved well past her grief at being single and had a nice sum in her savings account. That’s the kind of win I like to see!
Here’s my advice. You can relieve the stress by starting with good organizational habits right away. With a bit of up-front effort, tax time can shift from a dreadful chore to a walk in the park. This is when you collect your tax records and organize them for ready access.
A friend of mine started her own business. She was so excited by the work she was doing and all the good that she was delivering. In her excitement though, she had neglected to keep good track of her income and expenses. Kind of important when it comes to tax time!
She hadn’t taken the time to establish a business bank account to separate amounts of money, and her business was mixed with her personal accounts. Thus, when it came time to do her taxes she had a big mess and didn’t know where to begin. It took some time to get things sorted out but eventually she was able to go back and organize her business into its own set of books. She opened a business bank account with a debit card. By the next tax year, it was all so much easier.
No getting around it, good record keeping is essential for a smooth tax preparation experience. You can make it easy on yourself (and your tax preparer) by keeping all tax documents for the year in one place. Sure, it can be a shoebox if you want, but perhaps a nicely labeled file folder is even better — maybe a bright red one so that it will be obvious when you are ready to gather up the stuff and head off to do taxes.
These days, encrypted digital file storage allows tech-savvy organizers to keep clutter to a minimum. Chose a system and then be consistent. When a tax document comes in the mail, such as an interest earnings statement, interest paid on a mortgage, your W-9 or other earnings report — bundle it together for tax time.
Take My Advice
LOL: Here’s indispensable advice! Keep a solid record of income and expenses. Report all of your income, and take as many expenses as you possibly can. After all, Uncle Sam does not write you a ‘thank you’ note if you overpay him! But he will get very testy if you don’t report the proper amount of income.
If you own a small business or rental real estate, it is necessary to keep impeccable books of record. A clear accounting of the income and expenses associated with your enterprise is crucial at tax time! And, you want to demonstrate that you have a clear understanding of how your business is running and profiting.
This is an excellent area to outsource if it is not something you love to do or are particularly good at doing. Be aware of knowing when to seek outside help and asking around for reputable bookkeeping referrals to assist your business. Some women I’ve come to work with are so classic — they feel like they need to do it all. They are mothers, wives, daughters, friends and business owners and they truly want to be the best in each and every role. What inevitably starts to happen, though, is that you cannot keep up and something has to give. I say, figure out what is essential and outsource what is not. And, make your life easier!
Remember too if things get busy and your organization starts to slide, don’t get down on yourself. Take a breath, assess the situation and make a plan for how to get back on track. Sometimes it helps to break up a big chore into bite-size pieces. Reward yourself for incremental progress and before you know it you will be back on top of your game again.
Do you need more tax help? And is now the time to consider what you don’t know but may well be benefited by learning? Another good friend of mine was running a very successful therapy practice. Then one day she told me how worried she was about what would happen when she retired. She was disclosing to me in confidence that she needed more understanding and tax help to set up her future success.
She told me that since she had left her old job and then started her own business, she’d stopped her contributions to her retirement account. When I asked her why she had changed her strategy for saving, she said that she did not feel like she could afford to save because taxes were eating into her profits. Now she was worried that this was a short-term solution but a long-term problem. And, she was right.
We had a long discussion about the many different options that were available to her to set aside money for retirement and reduce her tax bill right now. At first, she was embarrassed that she, a successful business owner, did not know any of this. But better to be a little embarrassed than to not ask and explore the ways to set up future finances. Cash is a reality. And, she was curious about how she would have the cash flow for her whole life.
This opened up a larger conversation for us. I suggested to her that there is learning to be done for the ‘ins and outs’ of the tax code and how to manage money for a lifetime. It can take time and sometimes the help of a good friend or financial planner to make the best decisions in this complex world.
At tax time you will want to review maximizing pre-tax savings opportunities as a great way to grow your nest egg and save on taxes at the same time. When you understand what is going on in the rest of your tax picture, then you can then focus on things like increasing 401(k), 403(b) or IRA savings for retirement and contributing to a Health Savings Account for medical expenses. This is when you will want to ask about what can best work for you.
And, here’s the scoop If you are a small business owner. It is essential to prepare for your own retirement because no one else is going to do it for you! Do you know that a range of tools exist to help you be better prepared for your later years? SEP IRAs and solo 401(k)s are two popular options. Of course, as with everything related to taxes, there are angles like rules, limits, account types and pros and cons to consider. This is where some expert advice might come in handy.
So it’s that time, to read your tax organization and filing. Whether you prepare your own tax return or work with a professional, the more organized you can be all through the year, the less stress you will feel at tax time.
Ready, set go — and reach out for help. Find someone you trust who will work with you side by side and is willing to listen to your concerns and answer all of your questions, even the ones you think might show that you are not fully up to speed. By taking the time to create a plan to get organized good things happen. With your momentum gather a good team around you.
You can leave the old confusion and anxiety behind and step into a world of peace of mind — and opportunity for your future prosperity. And, you’ll love that!
Jennipher Lommen is a Certified Financial Planner ™ and Enrolled Agent. She is the founder of Wildflower Financial, a fee-only financial planning and registered investment advisory firm in Santa Cruz, CA. In her practice, Jennipher focuses on helping women and their families build confidence, security and abundance in every aspect of their financial lives. You can find out more about her here!