How Do I Prepare for Tax Season?
Get ahead of tax season's arrival! If you're feeling daunted by the prospect of sorting through forms, numbers, and regulations, you're not alone. However, taking proactive steps to prepare now can make all the difference in maximizing your deductions and streamlining the filing process. While the task may seem daunting, rest assured, we're here to guide you through it. Here's a comprehensive guide to help you navigate tax season preparation with confidence.
Gather Your Documents
The first step in preparing for tax season is to gather all the necessary documents. Depending on your personal circumstances, these can include:
- W-2 forms. These will be provided by your employer detailing your earnings and taxes withheld.
- 1099 forms. You’ll receive these income-declaration forms if you’re a freelancer or an independent contractor.
- Receipts and invoices. These include any expenses you can deduct or claim, including medical bills, education costs, charitable donations and eligible child care costs.
- Mortgage and loan documents.
- Investment statements.
- Previous years’ tax returns.
- Business income and expenses.
- Rental income and expenses.
- Other miscellaneous income, which may include SSA payments, scholarships, gambling winnings, jury duty payment and more.
Organize Your Finaces
After gathering your documents, organize your finances to make the tax preparation process more manageable. You can store all your documents and receipts in a folder, binder or digital file to make it easy to access them whenever necessary. This will save you time and help ensure you don’t miss any deductible expenses.
Prepare Your Personal Information
In addition to your income information, you’ll need the Social Security number and date of birth of each dependent you claim. It’s a good idea to have this information prepared before you start filing your return. You can also prepare any other details your tax preparer will need, such as the addresses of any rental property you own, the dates of any property you sold last year and more. Be sure to keep this information in a secure location until you file!
Review Tax Law Changes
The tax code changes each year, and some of this year’s modifications may impact your tax situation. Be sure to review the most recent updates so you can take advantage of any new deductions or credits. This can be especially important if you’ve experienced significant life changes during the year, like marriage, birth of a child or a change in employment status. You can find a list of this year’s changes here.
Determine Your Filing Status
Your filing status determines the tax rates and the standard deduction you’re eligible to receive. Choose the status that best fits your situation. The most common filing statuses are:
- Single
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er)
Selecting the right filing status is crucial for accurately calculating your tax liability.
Learn the Deadlines
It’s essential to be aware of the tax filing deadlines. For most individuals, the deadline to file federal income taxes is April 15th. If the 15th falls on a weekend or holiday, the deadline is typically extended to the next business day. If you need more time to file, consider requesting an extension, but be aware that this extension only gives you more time to file, not more time to pay any taxes owed.
Choose Your Filing Method
You’re ready to decide how you’d like to file your taxes. You can file a paper tax return and mail it to the IRS, use tax prep software like TurboTax or H&R Block, hire a professional tax preparer, or e-file your return on your own.
Plan For Next Year
Finally, use the tax season as an opportunity to plan for the future. Consider adjusting your tax withholding to avoid owing big sums at tax time or receiving large refunds. Also, maximize your retirement savings to take advantage of tax-advantaged accounts like 401(k)s and IRAs.