Our To-Do List Before Filing Taxes

What's on Your To-Do List Before Filing Taxes?

Well, it’s here…tax season is finally upon us. It’s that dreaded time of year that many of us have actively tried not to think about for the last few months. However, I’ve learned from experience that procrastinating only makes things worse. That’s why my husband and I have created a to-do list before filing taxes to make it as easy and stress-free as possible.

Our T0-Do List Before Filing Taxes

Ever since I was a student, I had a horrible habit of putting things off until the last possible moment. After a few self-induced panic attacks and deadlines that were cut a little too close, I decided it was time to make a change. Whether it was school work, chores, or financial responsibilities, I started keeping to-do lists to ensure deadlines no longer snuck up on me. If you are like me and tend to self-sabotage with the same bad habits, here’s our to-do list before filing taxes that could make the process a whole lot simpler.

1. Make a checklist.

When it comes to filing your taxes, most of the work comes down to locating all the documents you will need when the time comes. As I’ve learned, it can be a nightmare if you wait until the last minute.

Several years ago, I realized that I didn’t have everything I needed a few days before the deadline. So, my priorities immediately shifted. I spent hours searching through stacks of mail for the paperwork. I also discovered how painful it is trying to contact your employer and financial institutions during one of the busiest times of the year. Luckily, I got everything to finish my return on the last day to file.

Now, I start this process months in advance. It starts with a checklist of what we need to do and setting deadlines to keep us ahead of procrastination.

2. Take inventory of all your documents.

Thinking ahead and staying organized can prevent a lot of headaches. The checklist provides a good reference to make sure you don’t miss anything. However, I take it one step further to take inventory of all the documents so I can watch for them in the mail and gather them for when we need them. This usually includes W-2s, 1099s (including 1099-K, 1099-MISC, and 1099-INT), and personal receipts for itemized deductions. Since my husband and I file jointly, this means there are two sets of documents to collect.

While you can start from scratch, I found it helpful to look at past returns to save time. All statements must be sent out by January 31. So if you haven’t received them yet, you should probably contact the people responsible for preparing them. You may also be able to access them online. Amending returns can cost you time and money, so it’s best to make sure you have everything you need to complete your return accurately.

3. Upload digital copies for our CPA.

Even before we got married, my husband and I both realized that our taxes were too complex to handle on our own. Therefore, we have both used tax professionals to help us stay on top of things. Now that we file jointly, we use the same CPA to ensure we maximize our return every year.

Not only are tax professionals more experienced, but they also have better knowledge of the tax codes so we don’t miss any deductions. We have a great working relationship with our CPA. Part of this is because we try to prepare months ahead of the deadline to beat the rush. To make it easier, we upload the digital copies of our documents through his firm’s portal at least two weeks before our appointment to give him time to prepare everything. This greatly reduces the amount of time we spend in his office reviewing all our information and helps us get our return faster.

4. Make sure we have maxed out contributions to retirement accounts.

Once the paperwork has been taken care of, the next step is to see if we have maximized all possible deductions, including contributions to our retirement accounts. These accounts offer a huge advantage by reducing your taxable income and lowering your bill to the IRS. However, many people don’t realize that you can still make contributions for the previous year up until the filing deadline.

The first step is to verify the income limits for each type of account you hold (IRAs, 401(k)s, HSA, etc.) Then, you need to check how much you have contributed to each one for the year to see if you have any room to invest. However, if you found that you put in too much, you have time to withdraw excess contributions and avoid taxes and penalties.

5. Decide whether you need an extension.

In the past, I have experienced several hiccups when filing taxes, especially when I lived overseas. There was one year it was impossible to get everything together in time. Rather than incur penalties, I filed for an extension to give myself more breathing room.

If you are waiting on amended documents or having difficulty obtaining what you need, this may be a wise decision. Most tax preparers would agree that it’s better to wait until you have what you need rather than submit an incomplete return and have to amend it later. Those who file for an extension will have until October 16 to file their 2022 tax returns.

Important Things to Remember When Filing Taxes for 2022

Although this to-do list for filing taxes has been helpful, there are still surprises that come up. Here are a few important things to remember for this fiscal year:

  • The last day to file or request an extension is April 18th.
  • The tax brackets have changed.
  • You should be thinking now whether you will hire a tax professional or use tax software to save money. If you choose to file yourself, this guide can help you choose the best software for you.

Staying ahead of deadlines can make things simpler. But, smart strategizing can save you valuable time and money, optimize your return, and help you get closer to your financial goals. Are you ready for the 2022 tax season?

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5 Smart Ways to Use a Credit Card When You’re Unemployed

Smart Ways to Use a Credit Card When You're Unemployed

During times when people are unemployed or underemployed, they often rely on credit cards to cover their basic expenses. Unfortunately, the high-interest rates and accruing balances can compound financial difficulties. While many people avoid credit cards at these times, there are ways you can use them to your advantage. Here are 3 smart ways to use a credit card when you’re unemployed.

The Financial Struggles of the Unemployed

If you have never been unemployed, consider yourself among the fortunate few. However, the rest of us already have or will face unemployment at some point in our careers. There are several reasons why this happens, many of which are beyond your control.

Whatever the circumstances leading up to unemployment, it’s important to carefully manage your expenses during this time. Even if you have an emergency fund or savings, you can quickly blow through money. And with the current inflation rate and increases in the cost of living, it is even more difficult to stretch your financial resources.

It’s easy to become overwhelmed as expenses pile up and you worry about paying your bills, accruing debt, and keeping food on the table. And the longer it takes to find steady income, the worse it becomes. In addition to the job search, I found myself constantly scrapping to find temporary work or bring in income through side gigs. Not having a safety net or health insurance added another layer of pressure to an already difficult situation.

5 Smart Ways to Use a Credit Card When You’re Unemployed

When there are no other options, many people turn to credit cards to help them through hard times. However, this can be both a blessing and a curse depending on how responsible you are with your finances. While you should do everything possible from accumulating more debt, here are 5 smart ways to use a credit card when you’re unemployed.

1. Take advantage of introductory offers with 0% APR.

Many credit cards entice new customers with introductory offers for 0% APR. Although some only offer it for a few months, others extend the rate for 18 months or more. Taking advantage of these offers can provide a grace period that allows you to pay your bills without the added interest fees.

But, it won’t last forever. When the offer ends, the high interest rates will kick in. It could be more damaging if you can’t pay off the balance before the offer period ends. Therefore, you should only use it as a backup emergency fund and be cautious with your spending so you don’t end up with a mountain of credit card debt.

2. Look for balance transfer offers to save you money.

In addition to the introductory offer, some credit cards also include the added benefit of no balance transfer fees. This feature allows you to save on interest fees if you transfer your credit card debt to the new account.

If you’re smart and stay ahead of the expiration dates, you can transfer the balance again before the offer expires. However, this can be a risky game if you don’t get approval or can’t transfer the entire balance. When this happens, it will leave you paying off the rest at the fixed rate.

3. Choose one with a lower interest rate.

Unfortunately, you may have no other option but to use a credit card to pay your bills. However, the one you choose can make a big difference in your finances.

Take time to review the terms of your current credit cards. Compare the interest rates, credit limits, and fees. You can save a significant amount when you utilize ones that have lower fees. Reading the fine print and choosing the best credit for you can reduce how much debt you accrue when you don’t have a steady income.

4. Set spending limits or use prepaid credit cards.

Those who have trouble controlling their spending may need to take more drastic measures to protect themselves. If you find it impossible to resist the temptation to swipe your card for every expense, then you should consider putting a spending limit on your account.

Another alternative is to use a prepaid credit card. If you are living on a strict budget, you can load money onto the card at the beginning of the month and use it to pay for your expenses. However, once you reach a zero balance, you won’t be able to use the card until you reload it.

Both options will prevent you from accruing more debt and help you stick to your budget.

5. Redeem your rewards.

Many credit cards offer rewards programs that will earn you cashback or points on every dollar you spend. While this isn’t an excuse to rack up more charges, you may already have some rewards available to redeem.

Each card operates within a different structure. Each one has its own terms for how to use and redeem your rewards. If you go with the cashback option, they may send you a check or offer a statement credit. Others allow you to redeem your points for gift cards and other travel perks. So if you have been saving your rewards for a rainy day, this would be a great time to use those rewards to reduce your expenses.

The Hard Truth About Debt

While everyone hopes to stay debt-free, it isn’t always an option. At times, debt is inevitable, especially when you are between jobs. However, credit cards should be a last resort to help cover the essentials until you start earning a steady income again.

It’s best to consider all your options before turning to credit cards for all your expenses. And if you are using them, you need to make sure you are at least making the minimum payments. Otherwise, it could affect your credit score, put your account into default, or force you to deal with collection agencies.

If you must use a credit card when you’re unemployed, contact your lenders to inform them of the change in your job status. They will be more willing to work with you if they have advance notice of late payments. It’s also possible that they may lower or defer payments as well as waive penalties. Many credit card companies also have payment programs during periods of hardship. Although people hesitate to make the call,  it may surprise you to learn how understanding and helpful they are when dealing with financial difficulties.

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5 Regrets Many Homeowners Face

5 Regrets Many Homeowners Eventually Face

Buying your own home is a huge financial decision and an important milestone in life. If you hope to own a home someday, it will require a lot of time and planning to get there. However, it will also become a crucial asset and key component in your retirement planning. Making a large investment like this will always come with doubts. While this is normal, you want to do everything you can to ensure you make the right decision. Since your home will likely be the most expensive purchase you ever make, you don’t want to look back and have regrets. Unfortunately, these are 5 regrets that many homeowners face, and often wish they could go back in time to correct.

5 Regrets Many Homeowners Eventually Face

According to a recent survey, 70% of people who bought a home have at least one regret about their home-buying experience. The harsh reality is that current market conditions have led to some fierce competition for real estate. Many people have been caught up in bidding frenzies, unseen buyers, and large cash offers. While cost-based regrets dominated the feedback, here are 5 regrets that many homeowners face.

1. Paying way more than they had planned.

If you have been paying attention over the last few years, then you already know that it has been a seller’s market. People who hadn’t even thought about selling their homes put them up for sale because of the massive equity gains. And, most people are flooded with offers within the first few days, driving offers way above the asking price.

Unfortunately, this makes it difficult for first-time buyers on a limited budget and nearly impossible without good credit. Those who are set on buying a home are sometimes forced to spend more than they had planned. Others decided to postpone their search altogether. In the survey, 22% of people felt they overpaid while another 18% said they underestimated the costs of home repairs. These are the types of expenses that could set your financial planning back several years.

2. Compromising on important features of the home or contingencies of the sale.

With the higher price of homes, you can’t get as much for your money nowadays. But if you can’t compromise on price, then you have to sacrifice important features or contingencies to stay under budget.

If the price is the most important factor, then you will likely have to make compromises on the age, condition, location, size, layout, number of bedrooms and bathrooms, outdoor space, proximity to necessities, school districts, or other important features. Sadly, this often means settling for less than you had hoped for from your home.

Others have adjusted their timelines to accommodate the sellers, even going as far as agreeing to rent back options. Many people also reported that they offered larger down payments, didn’t ask sellers to handle repairs, skipped inspections, or sent personal letters and gifts to win them over. When homes are scarce, people are willing to take extreme measures to get what they want.

3. Not refinancing when interest rates were low.

For those who own their home, their mortgage is probably the biggest expense in the budget. Your home will be a top financial priority. But, it will require a large portion of your income for decades of your life.

Therefore, you should seize opportunities to reduce your monthly payments by refinancing your mortgage rate. You can monitor market conditions to determine when interest rates drop. And if you have a good credit score, you may qualify for a lower interest rate. This will allow you to pay off your mortgage faster and keep more of your income. But before you refinance, make sure to compare rates and terms between lenders to get the best deal.

4. Delaying home improvement projects.

Home repairs and maintenance come with the responsibilities of owning a home. However, many people put them off because of the expense and inconvenience of living in a construction zone. If you have this view, you may want to reconsider your perspective.

Although it can be expensive, it is better to address issues before they become bigger problems that will cost even more. Plus, it will add value to your home.

Unfortunately, my parents learned first-hand the cost of delaying necessary repairs. They had several projects around the house that had been neglected for years. After the pandemic began, materials costs skyrocketed. It also became more difficult to find contractors and required longer wait times to get the work done. Eventually, waiting was no longer an option as some things had become a safety hazard. So, they were forced to eat the cost.

Rather than procrastinating on necessary repairs, a home improvement loan can provide the capital you need. And, you can ensure you don’t miss out on a good opportunity when the time is right.

5. Not having a home warranty.

Every lender will require you to have homeowner’s insurance to cover losses and repairs resulting from damage. A basic policy will protect you against fire and smoke damage, weather damage, theft, and vandalism to your home, outbuildings and outdoor spaces on the property, heating and cooling systems, large appliances, furniture, and clothing. It will also provide living expenses if you need alternate lodging during repairs.

However, you should carefully read the details of your policy to ensure you have the coverage you need. And if you need extra coverage, a home warranty can insulate your finances against surprise home expenses. While homeowner’s insurance will cover many things, you may be stuck footing the bill for plumbing and electrical issues, water damage, mold, foundation repairs, roof replacement, etc.

If you purchase a supplemental home warranty, they have hotlines that offer 24/7 assistance. They will help you handle problems quickly without depleting your financial resources.

Buying Too Quickly

Based on the survey responses, it seems that one of the greatest regrets homeowners face is rushing into a decision. Nearly 20% of respondents felt they decided too quickly. Had they spent more time searching, they may have been able to find the perfect home within their budget. Although there are no guarantees, especially in today’s market, you don’t want to have these regrets. If you are facing too many obstacles, it may be wiser to wait for conditions to improve.

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