Is it time to file your taxes? Avoid this mistake! -

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Is it time to file your taxes? Avoid this mistake!

Over the last few years, we have been taking active steps in transforming our mindset around money. During this process, we have had to get intentional on budgeting and managing our money. The amount of mental and emotional work put in during this journey has not quite equaled instant financial gains. In fact, it has brought the opposite in which we have had to make some hard financial decisions. Not exactly what we were hoping for!

We would choose to turn down fun events with family and friends, forego vacations, routine haircuts, and many other expenses. We knew that we had to make sacrifices in order to prioritize our finances. However, we know that living like no one else now will help us live like no one else later!

Currently, we are in the midst of our first quarter tax season. Which means that it is time to file our taxes! This season has helped remind me just how far we truly have come on this financial freedom journey. The little reminders that we receive help keep us confident that we are on the right path. We are then even more motivated to continue propelling forward.

Oh, I just can’t wait to file my taxes!

Just a few years ago I would have been anxiously checking the mailbox every day when it was time to file our taxes. I just couldn’t wait for those lovely W-2’s to magically appear in my mailbox. I wanted to be able to file my taxes as soon as possible. After I was able to file, then came more anxious waiting for my windfall of a refund.

A few weeks would come and go and that tax refund was spent almost instantly without any real plan. Less than a month later, I would be left dumbfounded as to where it all went. The thought of having to go back to paycheck to paycheck living would bring in those creeping feelings of stress.

Tax Refunds are almost like a mini version of winning the lottery or hitting the jackpot at the Casino. You finally have enough money to take care of your problems so it seems. However, shortly after we find ourselves broke and in need again. The problem is that more money isn’t always the answer to our financial struggles. Sure, more money helps in many cases! However, we have learned that if we do not have clarity on our financial goals, then we will spend it all into oblivion.

Memories of a tax mistake!

This year our employer passed our W-2’s earlier than ever in the past 7 years. A few days later, coworkers were returning back to work, excited and pumped to receive their coming tax refund windfall. I seem to watch this happen year after year. However, this year something just clicked with this scenario and made me want to become more aware.

Fast forward a week later and a coworker comes to me. She, discreetly, asks me if I have ever seen this form and proceeds to show me a tax document. Instantly, I recognized that it was a 1099 form for a banking account incentive she received for switching. Just a few years before I had received a similar form. The purpose was to report the bonus offer I had taken advantage of the previous year when I changed banks.

The conversation then proceeded to the following question, “what do I do if I already filed my taxes?” I knew, now, that my knowledge and experience of working in the tax preparation world could be useful. As I mentioned, a few years earlier I had received the same type of documents. Since I was so quick to file my taxes that year, as well, I asked the same question.

I was able to simply pass along what I had been advised by tax professionals just years before. The advice I received was to reach out to a tax professional in amending my tax return. The mistakes could have an impact on your total taxable income and tax obligation. Tax professions can assist you in making the best filing decision based on your individual tax situation.

After weighing our options and learning about our risk of audits by the IRS, we made a decision. We decided to file an amended return that year.

The process of having to amend our tax return was a pivotal moment in our financial journey. The experience and knowledge gained helped us transform our thoughts and behaviors towards preparing our taxes for the coming years.

Now we wait!

I realized through this interaction, that we have been intentionally filing our tax returns later and later. Intentionally delaying the preparation of our taxes allows us to submit all tax documents. In return, this lowers our odds of having to amend our tax return later on. We have also experienced some financial changes in the last few years. This has also helped us in practicing delayed tax preparation.

Some of the financial changes we experienced were things like earning interest and the sale of inherited property. Additionally, we had retirement savings contributions and childcare expenses that changed. All of these items have provided us with tax statements that assist us in tax preparation. Also, they can serve as proof in the event that we were to be audited. Since we want to avoid having to amend our tax returns again and decrease our risk of being audited, we have decided to wait. We keep track of any financial changes throughout the year and we wait until we have documentation for everything tax-related.

How has this transformed our money mindset?

We believe that our mindset around tax preparation has greatly shifted in the past couple of years. We have gone from entering tax season with this sense of anxious financial desperation to this calming financial stability. This shift in our mindset has helped us in so many ways beyond tax preparation. Most especially in the way we choose to purchase things we need or want like technology gadgets, cars, and vacations. We find ourselves buying less impulsively and spending more time researching what’s available, comparing prices and finding the best deals.

Ultimately everything in this journey has centered around time! We rushed through time, we had to learn in time, and we had to wait for the right time. How ironic is that we have had to take time and experience to get to this point? This point in time where we can testify how much of an impact taking time can have. By taking more time to think and act on our financial decisions, we have seen positive progress on our journey!

So, you need to file an amended tax return?

Consulting our tax preparer was the best thing we could do when we needed to file an amended tax return. However, we also found the IRS website to be a great resource for us when we had tax questions. You can find tax recommendations, tips, blank forms and their instructions all by accessing their website here.

The IRS always recommends you amend your tax returns if you happen to find a mistake on things like incorrect filing status, deduction amounts or income credits.

Find below a few things to know about filing an amended tax return from the IRS:

When planning to file an amended tax return it must be on paper only. This means that you have to print and mail the amended tax return to an appropriate IRS mailing address.
After you have received your refund from your original tax return, you can then file your amended tax return. You can cash the refund check from your original return before receiving any additional refunds. However, proceed with caution as you may owe taxes back after your amended return is processed. This will also be very much determined on your individual tax situation.
In order to claim a refund, your amended tax return should be filed within three years from the date of your original tax return.
After submitting your amended tax return it can take up to 16 weeks to be processed. Three weeks after mailing your amended tax return, you can track that status at “Where’s My Amended Return?”