Are You Ready for the Tax Man?

It’s that time of year in the United States when Federal law requires employers to send all employees theirs W-2 statements no matter how low earning or wages are. It’s a great time to ask yourself are you ready for the tax man? The W-2 reports taxable wages paid to an employee during a one-year period, along with employment taxes withheld from paychecks for that year. It’s really the key document need to start income tax preparation. Law requires that W-2s be received by employees no later than January 31 of the following year, which is just a few days way.


Big or Small Return

For many years we received big tax returns, and often the money was gone in a few weeks. What it was spent on I could not begin to tell you now. What I can tell you is after we began to educated ourselves about our finances we examined our taxes and our large returns.

We changed our withholding to lower the amount of taxes be taken out of our paychecks and increased take home pay. This allowed us to have more money within our budget for things like our debt snowball. Someone gave me a great layman’s explanation of changing our withholding and basically stated we are loaning the Government our money and they are giving it back to us each year in the form of our tax return. We could continue to do that or change our withholding, having more money in our pockets each paycheck and less of a tax return. I liked the idea of having more money throughout the year.

I’m far from a tax expert, but found the best withholding numbers for our income and tax bracket to increase income during the year and have a small return. It also helped that we changed our behavior with money and now had a budget in place.

Tax Success

Like most things with money having a plan will serve you well. The folks over at Community Tax has put together a great infographic to help outline the steps to be successful during tax season.

Courtesy of: Community Tax

Do you file your taxes yourself or hire an advisor? Do you normal have a big or small return? What do you spend your return on?

29 thoughts on “Are You Ready for the Tax Man?”

  1. I file taxes myself but I do have some tax background since I am a CPA (even though I never worked in tax). Luckily, when I have issues that come up, I have a variety of resources I can reach out when I have questions which is helpful.

    I agree with you about not wanting a refund. Over the past few years, we have gotten closer and closer to a $0 refund. Last year we hit a net $7 which was great! I just know that I can put the money to better use throughout the year instead of giving it to the government to hold for me.

    1. Agreed, I don’t want to lend the Government any of my money. 🙂 I want to keep as much as possible and put it to work for me and my family.

  2. Greg does our taxes, but it takes him several hours each month and a few full days at the end of the year. I’m pretty sure I overpaid, so I hope to get a refund! I try to break even each year but I normally end up sending in a little more than I should.

  3. Great info! I always do our taxes (but I do have an accounting degree so that helps). This year our return is larger than in the past. I contribute that to the fact that my husband gets yearly bonuses, but his company withholds 40% in taxes. It is kind of a bummer at bonus time, but it actually makes it seem like we get 2 bonuses then when we get it back at tax time.

  4. Jon has been doing our taxes, but I am working as a paid preparer this year so that will probably change. We’ve generally gotten a relatively good sized refund, but will be a lot closer to break even this year.
    One note: Doing your taxes earlier rather than later makes it a little less likely that someone can file a fraudulent tax return in your name, and the incidences of tax fraud have been increasing yearly. So if you can get your taxes done earlier than April, there is good reason to do so.

  5. We use an accountant to file our taxes, but I’m responsible for gathering all of the necessary information and communicating with them. I’ve had a very small business for the past few years, which complicates our taxesa bit. I’m planning to fully close out the business this year, and wemay attempt filing on our own after that.

    Like you, I prefer to keep more of our money thorughout the year, rather than gettinga big lump sum back later.

  6. Kee-rap, thanks for reminding me that I need to make up a W-2 for myself! Ah, the joys of being an S-corp.

    I’m generally okay with a small refund. But anything over $300 annoys me because that’s good money we could’ve saved.

    Alas, this year I think I’ll actually owe $300ish owing to a mistake I made on quarterly taxes, but we’ll figure it out.

  7. Taxes have always been pretty complicated for us. With side income and in the past, part-time jobs, there is always extra work involved. We do a good job of gathering all the proper documentation and then sit down and do it all on Turbo Tax.

  8. I generally do my own tax returns and get a small refund. I like to file as soon as possible so they’re out of the way and the refund arrives sooner (plus as Emily said, it helps prevent fraudulent returns). I’ll be ready to file any day now, and I think this year’s refund will go towards a minor home repair project I’ve been wanting to get done.

    1. I usually get my done early too to knock it off the “to do” list, but love the added benefit of not having to worry about fraud.

  9. We used to get big returns too. Usually, we would spend the money in advance – knowing we were going to get it – and then spend the money again once we really did have it. Ugh! Now, our returns aren’t so big, but we put every penny towards debt-repayment.

  10. I’ve used a tax preparer – a small husband and wife team – for the last 15 years. While my taxes aren’t necessarily complicated, I’m not interested in spending any time – beyond getting the documentation to the preparer – or energy in doing them myself.

  11. I usually use Turbo Tax but this is the first year I have to file several 1099’s and now have no idea what I’m doing. I can only say that I will definitely not be using H&R Block because I was super unimpressed with their service when they helped me do my circus W-2s from like 30 states. Ugh. Tax time is so stressful.

    1. I’ve hear so many stories are people being under-impressed with the big services like H&R block. They are basically having people enter your info into a program like Turbo tax.

  12. Thanks for this infographic! Doing taxes is definitely important, but I do think the hype around it makes it seem harder than it actually is.

  13. We always get our taxes done by a professional as we want to ensure that they are done right. When we have gotten anything back, my husband and I may spring for a nice dinner but the rest goes to savings. Thanks for sharing!

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