It’s that time of the year again when taxpayers must organize their finances, prepare their paperwork, and file their annual tax returns. Getting organized for tax season may seem challenging, but with the proper planning and tools, it can be manageable—even easy. This article shares some valuable tips for preparing to navigate tax season appropriately.
Tip #1- Understand the current tax laws.
One of the most crucial steps in getting organized for tax season is reviewing and understanding the current tax rules. Tax laws and regulations often change yearly, so keeping up to date with these changes can help you understand your potential tax deductions, exemptions, and obligations. Learning about the correct tax forms required for your filings can also help you streamline your tax preparation process and avoid errors.
Tip #2- Gather your documents.
Next, gathering and organizing your financial documents is essential in preparing for tax season. W-2s, 1099s, receipts for deductible expenses, records of charitable donations, mortgage statements, and education-related paperwork are examples of the documents you might need. Maintaining a dedicated folder for these documents—both digitally and physically—may greatly simplify your tax preparation when the tax season arrives.
Tip #3- Use a tax calendar.
Maintaining a tax calendar is another strategy to help organize for tax season. A tax calendar can help you keep track of important deadlines and prevent costly late filing penalties. Remember that you can also apply for an extension if you need additional time to prepare accurate and complete tax returns. Nonetheless, it’s worth noting that an extension to file is not an extension to pay any tax due.
Tip #4- Hire a tax professional.
Consider hiring a tax professional to prepare your taxes and provide ongoing recommendations. They can help manage your tax liability while maximizing your potential refunds, especially if you have a complex tax situation.
Tip #5- Adjust your tax withholding.
It’s also worthwhile to consider adjusting your paycheck’s tax withholding. You might withhold too much from your paycheck if you received a large refund last year. On the other hand, if you owed a considerable amount, you might be withholding too little. Adjusting your withholding can help ensure you’re not giving the government a free loan or setting yourself up for a large tax bill.
Tip #6- Maximize deductions and credits.
While preparing for tax season, it’s prudent to consider potential tax deductions and credits. Determine if you qualify for deductions such as the earned income tax credit, student loan interest deduction, or child and dependent care credits, which can potentially lead to significant tax savings.
Tip #7- File early.
Preparing for your taxes well in advance is another essential tip. By starting early, you can avoid the stress and mistakes often accompanying last-minute preparation. Use the tax season as a reminder to review your financial health. For instance, if you have an employer-sponsored retirement savings account, consider increasing your contribution to lower your taxable income.
Tip #8- Keep past tax returns.
Finally, always keep copies of your filed tax returns and supporting documents. They can serve as a valuable reference to compare year-to-year changes in your income and deductions, help prepare future tax returns, and are necessary when applying for loans or social services benefits.
The secret to a stress-free tax season is organization and preparation. Understanding tax laws, gathering documents, using the correct tools, and filing early can significantly ease your tax preparation process.
SWG 3294937-1223f
Disclosure: The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.
At Core Fiduciary Advisors we know that as a fiduciary we are held to the highest standards of conduct. We will always act in our clients’ best interests. Our recommended strategies will take an objective and holistic approach, suitable for each person’s financial situation. Contact us today to begin your consultation.