“In this world, nothing is certain except death and taxes.”
Benjamin Franklin’s iconic quote was written as part of a letter in which he talked about the newly ratified Constitution of the United States, but the government’s ongoing need for revenue means the phrase is remains accurate hundreds of years later.
Do you have to pay taxes? Yes. Does it need to be stressful? Absolutely not.
Use these five tips to take the stress out of tax time.
- Find a good tax advisor. When you have the right tax advisor, you can relax, knowing that you have someone helping you with the tax strategies that are best for you. Your tax advisor should be qualified, experienced in your type of business or profession, and someone you like and trust. Get referrals from your financial advisor or from people you respect who are doing well. And while it’s good to check out prospective tax advisors online, don’t start your search for one on Google—this decision is too important to let a search engine algorithm make it for you.
- Don’t ignore your taxes. They’re not going away, so don’t get blindsided by a huge tax bill because you weren’t paying attention. Develop a sound strategy (see #1), and make your estimated payments. Not paying your taxes on time can result in interest and penalties that significantly increase what you have to pay—what Dave Ramsey calls a stupid tax. If you owe back taxes, set up a payment plan with the IRS to deal with them now.
- Employ others. You’ve heard the advice to hire people to do what you don’t do well so you can free yourself up to do what you’re good at. But the benefits of this approach go beyond freeing up your time. When you pay other people, you’re reducing your taxable income and creating a compounding effect by putting money out into the marketplace when they spend and donate what you pay them.
- Give wisely. My clients are some of the most generous people I know. We are called to give, to help the less fortunate, and the tax code encourages this by providing charitable tax deductions. But taking advantage of those deductions isn’t as easy as it used to be. Consider setting up a donor advised fund (DAF) to manage your giving and maximize the tax benefits. Go here to learn more about how DAFs work.
- Change your attitude. I live by the old saying that if you can’t change something, change the way you think about it. You can’t change the fact that you have to pay taxes, so change how you think about them. Consider this: If you have a high tax bill, it’s because you’re earning a lot of money. Your tax obligation is a byproduct of the great living that you’re making. You could stop being so good at what you do and watch your tax bill go down with your declining income—or you can celebrate your success and the benefits and responsibilities it brings.
Related: Give to Charity, Not the Government
This post is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
