By midnight, April 15th, over 150 million taxpayers will have filed their federal income tax returns. Unless you filed an extension to file your return late, you are probably one of them.
Now that your tax return is filed, what's next on your financial to-do list?
Below are 5 things you should do after filing your 2014 tax return.
Create an electronic file. You filed your tax return with the IRS. Now you should file your return with your other important documents. I suggest doing so electronically. Over the past few years, in addition to the hard copy that my CPA provides, I have been saving my tax return and other important documents in an electronic file on my computer which has an encrypted hard drive. This way I always know where my information is and can retrieve it easily.
Yes, you need to be careful about the security of your electronic documents, but there are ways to make that happen. For an article on the pros and cons of various ways to store your documents electronically, click here.
Provide a copy of your tax return to your financial adviser. Technically, your adviser is supposed to have up-to-date financial information on file for you anyway. This doesn't necessarily have to be done via your tax return, but providing a copy of your return to your adviser gives them useful information that they need to provide accurate and meaningful financial advice. It helps them help you.
Review your return with your tax preparer or financial adviser. Most professional tax preparers take a well-deserved break after April 15th, but for many of them their next crunch time isn't until later in the year. Schedule an appointment with your tax preparer and/or financial adviser for sometime between now and then to review your return and discuss ways to minimize taxes in 2015. They may be able to suggest strategies to reduce your tax burden for the coming year. Worst case, you can confirm that you are doing everything reasonably possible to ensure that you pay only what you owe.
Adjust your withholdings. According to CNN Money, the average tax refund so far this year is a little over $3,000. Back in the old days when you used to get paid interest on your savings, we called this an "interest-free loan to the IRS." With today's low interest rates, I am not sure that argument holds as much water, but nevertheless, it's your money. Why not keep more of it for yourself? Or better yet, funnel it into your IRA or 401(k). I am sure you can think of several ways to use this money that are better than loaning it to the government.
On the other hand, maybe you had to mail the IRS a check with your tax return. I hate it when that happens, but it's not the end of the world if you have the cash on hand to pay the bill. If the amount you owed was significant or if the cash isn't there to pay the taxes, you may want to adjust your withholdings so that you pay in a little more through out year.
Either way, if you are getting a large refund or have a large tax bill due, discuss it with your tax preparer during your 1st annual tax review starting later this year.
Get organized. According to the IRS, the average taxpayer takes about 13 hours to complete their federal income tax return. If you are self-employed or a small business, the average jumps to 24 hours! That's a day from hell that you probably don't need to relive. To reduce the amount of time you spend on your taxes this year, you must get organized.
Online accounting software can track your monthly income and expenses, reducing the amount of time it takes to update this information at the end of the year. Receipts and tax records can be scanned and saved into a 2015 Tax Records file on your computer (see item #1 above). Apps are available for your smart phone or tablet that scan, save and sort receipts, track your mileage, and manage other important tax information.
Tax time is never fun, but a few simple steps now can ease the burden in the year ahead.