Tax season just ended, and you probably filed your return with either the CRA or the IRS. So now what?
Even though you may be taking a deep sigh of relief that it’s over, don’t be too quick to celebrate. There are still a few things you can do to ensure that next year goes a bit more smoothly.
Here are 3 things you’ll want to keep in mind after you file your taxes.
1. Follow Up On Tax Related Issues
While your main tax return is done, there are still a few essential issues and loose ends you should keep in mind. The good news is that most of the basics can be done, researched, and monitored online:
- Amended Tax Filings: If you’ve made a mistake on your taxes, whether you’re a business owner or an individual, you can submit amendments to your return. You can find information online for Canada, here, and for the US, here.
- Audits and Reviews: Be sure to keep all documents and information you’ve claimed on your return in case you get audited or if your taxes get reviewed. You can research just exactly what to expect and how to be prepared for an audit or review with the CRA and an audit with the IRS.
- Tax Return status: Always stay on top of your tax return, whether that means simply jotting down your confirmation number or by checking your return status online with the CRA or IRS.
- Tax Refund Deposits: For your refund, you can usually have it sent by direct deposit from the CRA and electronically deposited by the IRS into an account under your name. Ensure that you’ve submitted the correct account information to avoid any confusion or delay in receiving it.
2. Get Organized And Prepared For Next Year
Taxes are an annual occurrence. As such, it’s a good idea to stay on top of things for next year. There’s nothing worse than leaving everything unorganized and leaving your future self to deal with it the next year.
That’s why it’s crucial to stay well prepared and track everything you do so that next year when tax season rolls around again, it’ll go more smoothly and stress-free. Here are some tips on how to achieve that:
a) Keep Your Documents Safe
Place your paper documents in the right folder and keep them in a safe and secure spot which you can easily access. Also, start placing every new tax-related document as it arrives into that folder so you don’t lose track of something important. There are several relevant documents, among the rest, you’ll need to save:
- Investment summaries
- Property tax bills
- State and local tax payments
- Records of donations
- Receipts from medical expenses
- Employee business expenses
b) Keep Hard Copies And Digital Copies Organized
Some other great advice is to use desktop software tools to work with your scanned and paper document and receipts for redacted information and easier management.
You can use Able2Extract Professional 11 which has an Optical Character Recognition software feature built right in, so you can convert any scanned document into a fully editable file format. Then with its text editor you can make any visible changes or modifications needed for third parties. You can save and manage your digital documents on your computer, or with tools like Mendeley and Qiqqa, or via the cloud.
c) Perform Regular Check Ins
It’s always a good idea to keep an on-going tracking sheet of important financial information. One way to do it is to set calendar alerts for each quarter to check your income and withholdings. You can use Google Calendar for such a task. This way you can ensure that everything matches up.
Also, your tax filing can change as your life changes. For instance, you can easily miss income that may apply to you if you’re an ebay seller, an Uber driver or have a hobbyist blog that generates income.
And don’t forget to look into how major life events will affect your taxes, such as owning a home, having a baby or working in a different industry. You’ll want to be informed on what tax forms and documentation you need along the way, what you can claim, and how to take advantage of the tax credits you may qualify for.
3. Make Plans For Your Tax Refund
While getting a tax return may seem like a nice little windfall of money, it isn’t. It’s actually money that you’ve overpaid to the government. You should be treating it like your income because that’s what your refund essentially is.
No one would argue that splurging your refund is the fun way to go, but if you want to come out ahead, you should figure out how to use your tax refund wisely. Here are some general ideas:
- Pay off your debt
- Invest the money (retirement savings, interest bearing accounts)
- Deposit into your emergency fund
- Invest in your skillset (pay for online courses, seminars or conferences)
- Make donations and contributions (you can claim them on next year’s tax return)
This is just a general list of common suggestions, but if you need more, you should always check in with an accountant on what works best for your situation. For any direct questions, you should get in touch with the IRS or CRA.