By Dave Horwedel, EA and CEO of Torchlight Tax.

Tax filing can be a stressful time for many Americans. Here are eight simple steps to lower stress and save time and money.

  1. 1. Have a Stable Storage Space for Your Tax Documents

“I have to get my documents together!” Does this statement sound familiar? We’ve heard it thousands of times from our clients at Torchlight Tax. Often the need to get them together is because you placed them apart!

Having a stable, safe space to store your tax records and perform your tax paperwork simplifies the tax filing process. There are two ways in which this can be done:

  • Storing Your Hard Copy:

The old school method of placing tax documents in one location will allow you to easily access your documents, saving you from a lot of hassle when you need them.

It is also advisable to work on taxes in the same space next to your records. If your returns are simple, getting organized could mean a file or banker’s box that you put in a closet and bring to your kitchen table.

Toss out your junk mail but not IRS and state letters and tax forms such as 1098s, 1099s, and W-2s.

When you receive and open your mail, place your tax mail in the same box. You will never lose your hard copy documents again!

  • Saving Your Soft Copy

Make it a priority that you have a solid backup plan when storing information on electronic devices or on-line. Keep your passwords safe and invest in antiviral protection on your devices to avoid hackers.

Take steps to become tech-savvy. This will allow you to perform tasks such as scanning hard-copy documents to save them onto your computer or other digital storage space. You can use an external hard drive, a USB device or store your information in the Cloud.

Finally, download soft-copy documents that you receive online through email or other apps. If you do this, then your computer and workstation will become your “stable location”. If your computer crashes, breaks or gets stolen, you will still be able to access your documents, due to your backup processes.

However you do it, follow the system and always put the documents in the same place.

  1. 2. Keep Separate Accounts for Business and Personal

If you have a business, make sure that your personal and business accounts are separate.

If you have multiple businesses, keep a separate bank account for each business.

Deposit all business income into the business bank account and pay all business expenses out of the business bank account.

Pay all personal bills from your personal bank account. Transfer funds from business to personal or vice versa before paying a bill.

Keeping your business and personal accounts separate will save enormous time and effort. Ideally, you should have a business account and business credit card, and a personal account and personal credit card. Properly used, these can replace shoe boxes full of receipts.

By not comingling business and personal funds, you simplify your bookkeeping and tax-filing enormously.

Remember if you pay an expense by credit card and take the whole expense as a deduction, you cannot take paying off the credit card as another business expense!

Your bank account showing payment is usually adequate to show you paid an expense. For charitable donations over $250, you do need a letter of acknowledgement from the charity as well.

  1. 3. Understand your Tax Return

At Torchlight Tax, we answer questions when we review each tax return with our clients. This helps our clients understand what is on the tax return, which makes the process easier the next year. Clients become alert about what to look out for when it comes to taxes.

  1. 4. Keep Track of Your Deductions and Tax Credits

If you buy solar cells or a new electric vehicle, these purchase documents go in your tax docs file for the year.

You may also be eligible for educational credits or the child tax credit or even the earned income credit.

Keep track of medical, charitable, and other expenses throughout the year.

  1. 5. File Early

Filing your taxes early can help you avoid stress and ensure that you receive your refund as soon as possible. When you file your taxes early, you also have more time to prepare in case you owe money to the IRS. In addition, the earlier you file, the more time you will have to make adjustments to your tax return before the deadline.

Also, if you have filed an extension, try to file your taxes well before the extension deadline.

  1. 6. Get an Extension if needed

It may be counterintuitive, but the IRS penalizes failure to file 10X the penalty for failure to pay.  At Torchlight Tax, as we approach a deadline, we get with our clients to file an extension for them.

It does not cost anything and does not raise a red flag. Also, if you miss filing an extension before the deadline, you cannot file one after the tax deadline.

  1. 7. Contribute to Your Retirement Account

Contributing to your retirement account is one way to save for the future and lower your tax bill. By making contributions to your 401(k) or IRA, you can reduce your taxable income lower your taxes.  Moreover, the money you contribute to your retirement account grows tax-free until you withdraw it in retirement. If you are self-employed, you can also contribute to a self-employed retirement plan.

You can also contribute to a Roth IRA. In this case, you do not get a tax deduction now, but you are not taxed on withdrawal. If inflation is high or you figure out a way to keep bringing in income during retirement, this may be a better option.

The advantage of the “traditional IRA” is if your income goes down when you retire, and you pay a lower tax rate. This situation may not be ideal in the case when inflation raises your income, tax rates go up, or you work after retirement age.

The Roth IRA gives you no tax deduction up front, but it accumulates tax free with no tax on distribution. Suppose you put in $5000 in after-tax dollars, and it accumulates to $30,000 when you retire in 20 years. The tax you saved on the $5,000 would result in you paying tax on the $30,000 later.

  1. 8. Learn to think strategically.

Most people live paycheck to paycheck.  They learn to spend a little less or borrow money to get through shortages. They do not look at the long term.

Try to figure out what you can do to increase your income.  Is there a certification you can get to increase your income next year?

Can you drive Uber on weekends for a year and make enough money to make a down payment on a small rental property or set up a small business?

This applies VERY much in the field of taxes.

You are welcome to contact Torchlight Tax for a free consultation to figure out strategic ways to increase wealth and minimize tax.  Having a small business and/or owning and renting out real estate can assist you in building wealth and creating tax saving options.

Also, shrewd use of trusts, LLCs and Corporations can lower taxes and protect your assets. This is a great thing to go over with one of our experts each year.

In the modern world, TAXES are probably going to be your greatest long term expense. So figure out ways to save and invest your savings to build some sort of assets. And once you start getting assets, take basic steps to protect them.

You are also welcome to visit our websites (Torchlight Tax and GuardDog Tax) or corresponding YouTube channels to learn more of these strategies.

To Wrap Things Up…

Hiring an Enrolled Agent or CPA is prudent if you are not up to date on tax.  A mistake on even a simple return can cost way more than the fee you pay a tax professional.

If you want to take the time and trouble to understand taxes and file your own returns, that is great.  Just be sure to review each year for tax changes, and DON’T GUESS WHERE TO PUT A NUMBER.  You will have to learn some tax nomenclature to do the job right.

An Enrolled Agent or CPA can help you navigate the complexities of the tax code and ensure that you receive all the deductions and credits you are entitled to. We can also help you identify potential tax savings opportunities and avoid costly mistakes that could result in an audit. If you are unsure about the tax implications of a significant financial event, such as starting a business or selling a rental property, consult with a tax professional.

By implementing these actions, you can simplify the tax preparation process and potentially pay less tax or get a higher refund.

Tax preparation can be intimidating, but by taking advantage of these top tax tips, you can simplify the process and lower the stress.

Contact Torchlight Tax for more information or to set up a free consultation. You can also call our friendly team on our toll-free number 877-758-7797, or email us at