Seasonal Tax Preparation Tips: What to Do Before Filing Season

Organize Your Financial Documents

As tax season approaches, it's crucial to gather and organize all necessary financial documents. This includes W-2s, 1099s, and any other income-related forms you’ve received. Having these documents on hand will streamline the filing process and minimize stress. Create a dedicated folder or digital file to keep everything in one place.

Additionally, don't forget to collect receipts and documentation for any deductions or credits you plan to claim. This might include charitable donations, medical expenses, or business-related costs. Having a comprehensive record will make it easier to substantiate your claims if audited.

Review Last Year’s Tax Return

Before diving into this year’s tax return, take some time to review last year's filing. This can provide valuable insights into your financial situation and help identify any changes that could affect your current tax obligations. Look for any deductions or credits you previously claimed and determine if they apply again this year.

If your financial situation has changed significantly, such as starting a new job, getting married, or having a child, consider how these factors might impact your tax return. Understanding these changes in advance can help you prepare more effectively.

Consider Tax-Deferred Contributions

If you haven't maxed out contributions to tax-deferred accounts like IRAs or 401(k)s, now is the time to do so. Contributing more to these accounts can reduce your taxable income and potentially lower your tax bill. Make sure to check the deadlines for these contributions, as they often extend beyond the end of the calendar year.

Additionally, review any Health Savings Accounts (HSAs) or similar plans you may have. Contributions to these accounts can also offer tax advantages and help you save for future medical expenses.

Stay Informed About Tax Law Changes

Tax laws can change frequently, and staying informed is essential to avoid surprises when filing your return. Review any recent updates that might affect your tax situation, such as changes in standard deductions or new credits. Reliable sources include the IRS website and trusted financial news outlets.

Consulting a tax professional can also be beneficial if you're unsure about any recent changes or how they impact your specific circumstances. They can provide personalized advice and ensure you're taking advantage of all available opportunities to minimize your tax liability.

Plan for Estimated Tax Payments

If you’re self-employed or have additional income sources outside of a regular paycheck, you may need to make estimated tax payments throughout the year. As tax season approaches, review your income and any estimated payments you've made to ensure they align with your expected tax liability.

This is also an excellent time to adjust withholding or estimated payments if necessary, preventing potential penalties or underpayment issues when filing your return.