Tax season is almost here. Most people tend to let their holiday hangover wear off before they even start thinking about taxes, but if you have time, you might want to start doing a few small things to begin preparing for tax season now.
Tax season can be a very stressful time, especially if you’re not organized or need to recover information you misplaced.
However, the tax preparation and filing process can run very smoothly as long as you start preparing ahead of time.
Here are 5 ways you can start preparing for tax season now.
1) Start Organizing What You Have Now
When filing your taxes it pays to remain organized because it can save you a ton of time and frustration. While you may not have all the information you need right now, it doesn’t hurt to start organizing the documents and information you do have like receipts, charitable donations, retirement contributions, tax forms from previous years, etc.
Even if you just have an hour or so per week to set aside, you can make a ton of progress in terms of organizing all your tax information and you may even realize that you need to order/recover certain documents that are required in order to file.
One year, I realized I misplaced important personal information needed to file my taxes and if I hadn’t started getting organized ahead of time, I wouldn’t have known until the last minute.
2) Make a List of All the Income Forms You Need to Receive
If you you worked for more than one employer throughout the year, you should be expecting more W-2 forms. Or if you have a side hustle, you might receive a 1099 form for completing any contract work (DC wrote a great post on how to pay taxes for side hustle or extra income. Either way, make sure you report and file taxes for all of the income you earned this year.
The more streams of income you have, the better, but it can also make tax time rather confusing because you don’t want to forget a 1099 form.
Since I freelance and have several different clients, I always make a list of how many 1099 forms I should expect to receive during tax season and from whom.
I also track the income I earned so I can compare it to what shows up on the 1099 form. To be honest, I didn’t really do a good job of tracking the extra income I earned when I started side hustling.
So if you are behind, you can always start tracking your earnings and expenses from previous months now to catch up before the end of the year.
3) Learn About Tax Credits You May Qualify For and New Tax Laws
Each year, tax credit guidelines and requirements are subject to change which is why it’s best to stay on top of any new rules or requirements.
If you made any changes to your filing status or got married, you may be eligible or ineligible for certain tax credits so it doesn’t hurt to learn how your taxes might be affected ahead of time.
You can see updated information about the tax credit and deductions for individuals and businesses by visiting the IRS website. Also consider checking out DC’s post 6 Tax Advantage Savings for Millennials
4) Continue to Contribute to Your Tax Advantaged Accounts
There’s still time to max out your 401(k), Roth IRA, HSA, or any other tax advantaged account if you haven’t done so already. The holiday season can be a draining time for your finances toward the end of the year but if you’ve already budgeted for your contributions it shouldn’t be a huge issue.
You also don’t have to max out all your contributions even though it’s great to do each year. With a Roth IRA or a traditional IRA for example, you technically have until April to contribute up to the maximum amount. Continue to contribute what you can and enjoy the tax benefits.
5) Figure Out How You Will File
Once you’ve done all the hard work to prepare, it’s also a good idea to think about how you will file your taxes this year. If you’ve had a bad experience in the past, will you change anything about your process or try something new?
Some people prefer to do their own taxes and if you go with this option, you’ll need to do all the research you can and figure out if you’ll go with a tax filing software like TurboTax.
On the other hand, you might want to rely on a professional to help you file. If you don’t have an accountant in mind already, you can ask friends or family members for referrals. Also, don’t forget to consider how much filing your taxes will cost you so you can budget for it.
Since I got married earlier this year, I imagine I’ll probably be paying my accountant more money since this will be my first time filing with another person instead of filing as single like I did in the past.
The Sooner You Get Started, the Better
Filing your taxes doesn’t have to be a long and drawn out process. The sooner you start getting prepared, the better since you’ll be able to file quicker and without added stress.
If you’re looking for more tax tips, here are some great additional articles to read:
Have you started doing anything to prepare for filing your taxes yet? What do you do to get ahead?
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I haven’t taken any action yet, but have been thinking about gathering some of our tax info together before the end of the year. I keep a file folder that I add important documents and receipts to throughout the year. Being organized has been a huge time-saver for me.
I am such a nerd and eagerly await January 1st.
I actually start before then and play around with a spreadsheet that I created that guesstimates my what my tax refund will be. It’s usually super small as I’m not interested in providing interest free loans to the government.
But yes I am super pumped prepping for tax season!!!
I would like to just ditto your comment and put my name on it-ha! The nerd part, the spreadsheet part, the pumped part… Because of our expat assignment, the company my husband works for provides tax preparation with one of the big firms. I love to wait until they’re done preparing and then compare my spreadsheet to the return they completed to see how good my tax skills still are. Exciting stuff!!!
We just plopped several hundred more into our HSA this month and upped our charitable giving in hopes that we can avoid having to pay in. I hope it works! :-)
Planning ahead helps in two ways:
(1) It helps you file your taxes ahead of the deadline without scrambling in the last minute.
(2) Based on your return (whether you owe or are expecting money back), you could adjust your deductions appropriately for 2017.
I am thinking of visiting an accountant before the end of this year. I have always done my own taxes – for 2016, I am leaning towards using an accountant.