Having a Stress-Free Tax Season

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Real Estate

Dollars and Sense: 3 Tips To Have a Stress-Free Tax Season

Ready to stay fit financially?  Check out the 3 tips that get you there during tax season. Leaner and Meaner Tax tips.

It’s the time of year for cooking, shopping, entertaining and all of the fun things that make the holiday season exciting. But look there, just over the horizon! It’s tax time! It’ll be here sooner than you know it.

If you’re one of those people who always feels that you’re caught unprepared, this is the time to put together a plan. An afternoon of preparation could streamline your 2019 tax process and leave you breathing easier once April 15, 2020 rolls around.

1. Get Organized

It is very important to stay organized.  Organize both your digital and paper records.  I use a box labeled taxes and I used a digital scanner on my phone for paper receipts that saves it wherever I want.

When you receive tax records from your mortgage company, student loan servicer, brokerage and other entities just after the first of the year, label a file folder or shoebox and put all tax-related documents there when you separate the mail.

For cloud based technology use Google Sheets or Microsoft Excel to create a spreadsheet where you can categorize income, expenses, investments and other items that you’ll need for tax season. Differentiate between different types of expenses because different rules apply. 

Don't forget to differentiate between personal expenses (your home mortgage, medical expenses, student loan interest) and professional expenses (marketing, closing gifts, travel, office expenses). You can use one spreadsheet with different columns or one file with a number of different sheets.

Label, label label - One of the most effective ways to facilitate organization is by labeling carefully, adding notes and color coding your system.

Try using some of the following techniques to get started today:

One color for personal expenses and another for business
Different colors for different types of deductions
Different colors for different investment properties and related expenses
Color-coded files for various types of income and related expense documents

The more organized you are now, the easier it will be to both prepare your taxes and find information if you need it for your tax preparer or an auditor.

2. Tackle deductions

After getting organized, you’ll need to put together your spreadsheet of tax deductions. These will have the biggest impact on your bottom line, so it is very critical that you have carefully recorded and documented every dollar and cents.

Here are some deductible expenses for you to consider (subject to limitations):

·      Business travel

·      Business meals

·      Closing gifts ($25 limit for each, though branded gifts may be eligible for the full cost as a marketing or promotional item)

·      Commissions paid to other agents

·      Conferences, trade shows and seminars

·      Contract labor (virtual assistant, graphic designer, content creator)

·      Education and training products and opportunities

·      Employee wages

·      Home office and home storage

·      Insurance premiums including health insurance (if self-employed) and E&O

·      Legal and professional services and fees

·      Marketing expenses

·      Membership in professional organizations

·      Mileage and vehicle expenses

·      Office rent or desk fees

·      Office supplies and expenses

·      Postage

·      Retirement plan contributions

·      Self-employment tax

·      Subscriptions to professional publications


To ensure that your travel and other business expenses will be allowed, be sure to include the date of the expense, the amount of the expense, the place of the expense, the purpose of the expense, the professional relationship involved.  You will not need to include this information in your tax filing, but you will need to have it to justify the expense in case of a question or audit by the IRS.

As to the other big deduction, the home office, there are two possible ways to calculate the expense. A home office can be calculated as a percentage of:

·      The finished portion of the home

·      The total square footage, including both finished and unfinished spaces

You may choose to base your home office expenses on the total square footage if, for example, you use your garage or a storage space in your home exclusively to store paper copies of your records, staging items, signage and other things that are directly related to your business.

Try calculating both total square footage and finished square footage and see which ratio gives you the biggest bang for your buck.

3. Consider last-minute adjustments

If you are anticipating a large tax payment this year, you might want to help offset your tax burden with some small adjustments to reduce the amount you owe. These can include:

·      Taking a continung education or GRI class

·      Making a charitable donation

·      Maxing out your retirement giving

·      Paying for marketing materials or promotions

·      Purchasing office-related items

·      Renewing professional subscriptions or memberships

·      Selling investments that have lost value

·      Making an extra mortgage payment

·      Deferring bonus or commission payment until January

RULE OF THUMB and DISCLAIMER:  Always discuss your possible tax strategies and options with your CPA or tax adviser.

Your role is to maximize organization so that your tax preparer can ask the right questions, find the right information and help you get every penny that you deserve. You don’t have to be an accountant to put together a winning strategy for tax time.