Want some good news about your taxes? Emancipation Day falls on Friday, April 15 in D.C. this year, which pushes the filing deadline to April 18. That gives us all an extra weekend to prepare. You should still try to get your taxes out of the way now, though, if you want to KonMari your financial closet.
“It’s a really good time to think about your financial goals for the year,” says Steven Zelin, our accountant for the past eight years and a savior to many other creatives and professionals. “And also to think about the financial goals you set for the previous year, to see how you did, and what you could do differently.”
Doing your taxes now, in other words, will force you to take a fresh look at your spending and saving habits, and help you streamline them going forward. Here are a few suggestions from Zelin to make tax time easier, and pave the way toward healthy finances in the new year:
- Freelancers and business owners have a number of deductions available to them, but if you’re an employee, there is something called unreimbursed employee expenses that you can deduct—but only when these expenses reach 2% of your income. It’s a significant threshold to meet, but those expensive coding classes you took to improve your HTML/CSS skills at work could help you reach it.
- If you’re a wage earner, and you owe money in taxes due to not having enough tax withheld, you can update the withholding information on your W-4 so that you can pay more during the year and not get hit with as big a tax bill at the end of it. If you’re self-employed, start making estimated payments throughout the year for the same reason.
- Make a goal to save a certain amount this year by building (or adding to) an emergency fund. If a lot of your disposable income is tied up in credit card and/or student loan debt, determine the interest rates you are paying for each and develop a strategy for paying them down. Some prefer paying down the higher interest debt first, others recommend paying off your lowest balance first to lift your spirits—or should we say, “spark joy.” Whatever you choose, it will help with that emergency fund saving plan.
- Start thinking about your retirement fund, too. You could contribute more to your 401(k) plan at your job, or consider contributing to a Roth IRA or traditional IRA. There are lots of free calculators on the Internet that can show you which one would be best for you. Here’s one to try.
“Looking at your taxes is like looking back,” says Zelin, and will help you manage your finances better going forward. He can help you do both. As clients who have benefitted from his organizational skills over the years—like the tax checklist he sends every January, or the income and expenses spreadsheets for artists that he offers on his site—we guarantee he will make figuring out your finances a lot less taxing on your spirit.