Don’t Hate the IRS – Follow These 8 Tax Filing Tips

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Tax Filing TipsThis article was originally published in January 2014. It has been recently updated.

The tax filing season starts on January 23rd for 2017. You’ll have until April 18th to complete them (thanks to D.C. Emancipation Day).

In preparation for the tax season, it is imperative that you have a strategy to complete your taxes quickly, accurately, and with as little hassle as possible… all while keeping the cost down.

With those things in mind, here are eight tax filing tips to help keep you sane this tax season.

1. Start and Finish Your Taxes in One Sitting

Make this goal a priority early on so you don’t waste time and become frustrated.

Once you have everything you need, give yourself 3-4 hours of alone time without distractions. Any extra time spent beyond the minimum is time you can’t enjoy yourself or be productive elsewhere in your life. Sit down, input your data, double-check, submit your return and be done with taxes until next year.

For the more careful, consider waiting a day or two before hitting the final submit button. You don’t want to make the same mistake I did. For more complicated returns, you can print a draft and have a CPA review it before submitting through an electronic processor such as TaxAct or H&R Block.

Bonus Tip: Wait about a week after the IRS starts accepting returns before you do your taxes. Let other people be the computer system guinea pigs. You don’t want your return to get stuck because the computer kinks haven’t been shaken out yet, like these 600,000 people in 2012.

2. Don’t Start Your Taxes Until You (and the IRS) Have Your Shit Together

This may sound like a no-brainer, but you can’t complete your taxes until you have all of your 1099s, W-2s and everything else. If you start when you are still missing something, you’re wasting your time because you can’t finish (see tip #1).

Also keep in mind that some years certain forms may be delayed due to late legislative changes. If you need to submit an uncommon form, make sure that no form delays have been announced by the IRS (2016 looks OK so far). If you submit your return and the form can’t be processed, the tax preparer will hold onto it until the IRS systems are ready to accept it.

3. E-file Your Return. DO NOT File a Paper Return

About 20% of Americans still file paper returns. Those same people are probably writing checks at the grocery store and filling out deposit slips at the bank too.

Submitting a paper return is counter-productive to just about every item on this list. Most of all, it increases the likelihood of a mistake which could lead to residual correspondence and refund delays.

Think of the return preparers (Turbotax, TaxAct, H&R Block) as both your tax efiling guides and math checkers. E-filing sorts out errors before they are submitted to the IRS.

With paper, you can make a blatant mistake. Or worse yet and out of your control, the IRS person typing in the return could screw it up.

There is no good reason whatsoever to file a paper return (if you know one other than “I’ve always done it that way”, please let me know in the comments). By the way, if you already hate the IRS, consider this spot-on piece by Rodney Mock in US News & World Report in which he states:

Processing paper returns costs the IRS $2.87 per return versus $.35 cents for e-filing. The taxpayer error rate with paper returns exceeds 25 percent versus less than 2.5 percent for e-filed. If all returns were e-filed, the Treasury would collect billions of dollars in additional revenue.

Fixing errors costs money too.

In other words, you’re wasting government money and resources by filing a paper return.

4. Pay Exactly Your Share of Taxes. Not a Dollar More. Not a Dollar Less.

You share this goal with the IRS. Don’t screw up and pay extra or not enough. The IRS wants you to pay exactly what you owe and not a dollar more. Use an online tax preparer or CPA to make sure the math is right. Even if you don’t suck at math, you can still misread the instructions or forget an attachment when you submit via paper, leading to residual correspondence.

Also remember, the IRS isn’t out to get you. They enforce the rules in the tax code. The tax code was constructed by the US Congress over many years and changes were approved by a sitting President. So if you don’t like the IRS or what they stand for, blame lawmakers!

5. Don’t Overpay Preparers to File Your Taxes

Each online tax preparer company does the same thing, regardless of what the commercials say. So compare prices between the major online tax preparers and go with the cheapest one that covers your tax needs. I’ve used both TaxAct and H&R Block over the years and both are easy and reliable. Each offers a few different service levels that should easily cover your needs.

If you have a very basic return, any preparer will do. As your return gets more complicated, I’ve found that TaxAct is consistently cheaper than the rest. H&R Block has a better user interface.

For most situations, you can do everything on your own using an online tax preparer website. Try assembling your return online first. If your situation is extremely complicated or you aren’t comfortable, then consider hiring someone. Shop around to make sure the price you’re quoted from a CPA is reasonable.

Avoid buying the tax software on CD. The websites are constantly updated. CD based software will need to be manually updated before you get started and that can be easily forgotten.

You can always start your return with an online tax preparer and see if you’re OK on your own. You usually don’t have to pay until you submit your return.

NEVER GET A REFUND ANTICIPATION LOAN. Seriously, those are for dumbasses. Due to IRS system upgrades in recent years, refunds are now usually direct deposited to your bank account in less than 10 days.

6. Avoid ID Theft

When it comes to tax time, you can do one thing to help prevent ID theft. File your return early. If your social security number was somehow compromised during the year and a criminal submits a fake return using your identity, you’ll be prohibited by the IRS from submitting your real return until it’s straightened out. You’ll have to go through hell with the IRS to clean it up.

Funding cuts have directly impacted phone support.

The IRS is getting better at preventing ID theft every year, but the problem persists.

The sooner you submit your return, the less time you give a potential criminal to submit before you. But don’t start until you have your shit together, and still wait about a week after the IRS starts accepting returns in case the IRS or preparers have buggy software.

7. Avoid Residual Correspondence

If you make a dumb mistake on your tax return because you paper filed or were sloppy with your e-file, you’re going to have to deal with the IRS again down the road. Math errors, missing attachments, or missed 1099’s will eventually trigger an IRS love letter in the mail, and no one wants to receive one of those.

Worse yet, you may owe more money and be required to pay penalty and interest at a later date, or need to submit an amended return. Be smart, be accurate, submit early, e-file and you should not have to deal with the IRS again until next year.

8. If Your Refund is Large, Change Your W-4 with Your Employer Immediately

Everyone hates Form W-4. If you received a big refund, you probably filled it out wrong. Your goal every year should be to pay exactly your share of taxes each paycheck and not a dollar more or less than is required by law.

Make sure your W-4 is accurate so your refund isn’t too large, and you don’t owe any money when you file your return. Your paycheck will be bigger, keeping your money in your accounts earning interest for you instead of the government. If you need guidance on Form W-4, the IRS has a free Withholding Calculator to help you fill it out.

Note: The author is not a CPA or tax attorney. Contact your own professional for specific tax advice.

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13 Responses to Don’t Hate the IRS – Follow These 8 Tax Filing Tips

  1. Kay January 20, 2014 at 8:38 pm #

    Well it all broke down for me at #1. 🙂 I usually start and then come back to them. I certainly revisit the process a few times since I check and double check everything. Not the most efficient, but I really don’t enjoy the process.

    I also use TaxAct – their price can’t be beat. Interesting point about ID theft. That may actually motivate me to file earlier this year than usual.

    • retirebeforedad January 21, 2014 at 7:56 am #

      GMS,
      One sitting! Otherwise you’ll be wasting time. It can be tempting to try to guess how much of a refund you’re getting by running some numbers early on, but it won’t change anything. ID theft is a real problem. It gets a lot of press. The biggest problem is that you’ll have to spend time trying to talk to someone at the IRS to fix things, and it will take long after that to get it straightened out. Major hassle to avoid.
      -RBD

  2. writing2reality January 21, 2014 at 3:20 pm #

    Great tips here RBD. The first one is important because losing your place, or missing something while double-checking later can be quite costly. They actually try and teach professional preparers something similar in that you don’t want to get caught with too many “open items” while preparing. The last point about adjusting the W-4 is also important. No need to give Uncle Sam an interest free loan! My ideal is to owe $500 or so per year.

    I’ve used TaxAct for personal and business returns for about six or seven years now and it has been tremendously easy and much more cost effective than other programs.

    • retirebeforedad January 22, 2014 at 10:27 am #

      W2R,
      Good to hear from someone who has done a lot of taxes. I write as someone who knows the ins and out of the IRS itself having been involved with the organization at times over my career.
      -RBD

  3. Leigh January 28, 2014 at 11:13 am #

    My ideal is to get a refund of < $500. I tend to underestimate some of my deductions, just to err on the safe side. Next year, even claiming 0 allowances on my W-4 will probably not be enough tax since my employer underwithholds on my bonuses. I'm still trying to decide between making estimated tax payment(s) to cover the shortfall or fidgeting with my W-4 further. Do you have a suggestion of which is easier?

    I actually try to do my tax return in two sittings. That way, I have time to reflect on it and make sure I didn't forget anything.

    • retirebeforedad January 28, 2014 at 11:24 am #

      Leigh,
      Two sittings makes sense in this case, to mull over it for a few days in case you forget something. I was paid out for my HNZ shares earlier this year and I am only now looking into my cost basis. This all went down 6 months ago so I could have forgotten about it. That withholding calculator I refer to in the post can help your w-4. Claiming 0 will mean you’ll pay the most possible to the IRS. Claim as much as you can on the form and you shouldn’t owe much, if any. Estimated payments is another thing to worry about, doesn’t help simplify your financial life. I’d stick with the W-4. Thanks for all the comments today!
      -RBD

      • Leigh January 28, 2014 at 11:28 am #

        Hmmm that’s true, but then I could get caught paying penalties since my income tax liability will most likely be less in 2014 than it was in 2013.

  4. JTF February 1, 2016 at 1:45 pm #

    I disagree with #3. I still file paper return. Here is good a reason besides “I’ve always done it that way”: IT’S FREE!! Unless your income is below $62,000, you have to pay a fee to file your taxes. Why pay more than you have to?

    • Retire Before Dad February 1, 2016 at 2:27 pm #

      JTF,
      Good point that I missed. It is free. However, your chances are greater for a mistake. I’ll pay the $20 so it’s easier and less a chance to have to deal with an error.

      If you haven’t yet, read the opinion piece I linked to. The country needs to move away from paper for a number of very logical reasons.
      -RBD

      • ryanrbradley February 4, 2016 at 11:11 pm #

        Having first been a taxpayer in Denmark where everything is computerized and calculated for you (in 99% of cases), I find the US electronic system incredibly frustrating. I’m morally offended by the idea that a taxpayer should have to pay money in order to submit their returns. Why does everyone just accept this?

        I’m with JTF that points #3 and #4 don’t reconcile. I’m filing paper for free so it is the IRS and not me who suffers for this situation. Things will never change without aligned incentives, so I’m not giving the IRS a break here.

        • Retire Before Dad February 5, 2016 at 7:28 am #

          Ryan,
          If had had written this post as 8 things you should hate about the IRS, we’d probably mostly agree.

          Unfortunately, we have to deal with the situation we’re dealt, which is a massively complicated tax code, and a very strong industry lobby built on that complexity.

          An agreement stuck decades ago led to the private/public filing system. Something like 60% of federal returns must be able to be filed for free. The e-File companies can then charge for State.

          I’m not defending our tax system. It sucks. Blame lawmakers. What I am saying is that, given the complexity, e-filing is a more accurate way to file. It will lower the likelihood of future correspondence with the IRS. I will also say that e-filing serves as a checks and balance for the IRS in terms of making sure the computer systems match the tax code.

          Again, perhaps I could write a big complaining post about our horrible tax system. That wouldn’t help anyone so I aimed to write a post that could help people reduce hassle.
          -RBD

  5. Wisdom Junkie February 16, 2016 at 3:39 pm #

    RBD –
    Long time fan, first time poster. Your NSFW post from about a year ago is my personal manifesto.

    I will give you three good reasons why I paper file versus e-file. First, let me point out that I prepare my taxes with H&R block at home and have since 2005. I use software from a CD, not a pencil and paper. It’s $30 well spent. I just simply print it out at the end and mail it in versus filing electronically. Here’s why:

    1) Identity Theft – when you e-file, your return doesn’t go straight to the IRS. It first goes to the Turbo Tax or H&R block servers, both of which HAVE been hacked. Just do a quick google search. I safeguard my SS # to the best of my ability and that includes paper filing.

    2) Complicated Taxes – I have interest in several partnerships that issue K-1’s, some of which I don’t get until the end of March. These are each unique and their tax treatment is complex. Sometimes you have to manually key a value into a form which automatically disables your ability to file electronically. So in addition to I wouldn’t, I couldn’t if I wanted to.

    3) High income – I am blessed to have an income in the $300 – $400k range depending on the year. Just having a high income makes you a greater audit target. The reality is that a computer can synthesize my 40 page return in a nano second and might flag me for something silly: high charitable contributions to my church, for example. I’m not at all trying to cheat the system…I don’t need to and wouldn’t, but why make it easier to become a target of a government bureaucracy? The hand keying of a few fields gives them less information to red flag me and since I statistically have an 11% chance of getting audited anyways, I try to do anything I can to reduce the probability in my favor.

    When you pay more than the median HH income in federal taxes, trust me that you don’t give two hoots about their $2.87 to process it. I wish we could just simplify the code to a consumption tax that excludes non-prepared food, clothing under $50, and housing. No forms to fill out and the only enforcement would be at the retail/wholesale level. Maybe some day…

    Keep up the great work. I’ll be following you!

    Wisdom Junkie

    • Retire Before Dad February 16, 2016 at 4:05 pm #

      Wisdom Junkie,
      You make some valid points. You’re high income makes your 40 page return a bit of an outlier. I’ll comment on each.

      1. Good point about the external hacking. As I understood, these were accomplished by phishing and sourcing PII from other places, then used to create a false state return. But the e-filers are yet another place for your data to be hacked.
      2. I’m not aware of any forms that disable the ability file electronically. I know in years past, some of the late legislation for tax extensions delayed certain forms. Electronic filing is better for complex returns because it lowers the likelihood of a fat finger mistake.
      3. Interesting counter-intuitive argument. You don’t want the all of the electronic data to trigger any kind of audit because there’s so many data points to choose from. Never heard that before, but it makes sense. Kudos.

      Your last point about cost is obvious for a high income individual. That’s more a bigger picture issue. If an additional 20% of filers were using the electronic system, costs would be lowered drastically.

      Of course, they should just simplify everything and eliminate all the special treatments in the code. That would make it easier for all of us.

      Thanks for the insightful comments. And I like that email address.
      -RBD

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