How to Prepare for Tax Season and Why It’s Important to Do It Early
Are you wondering how to prepare for tax season? We’re here to break down why you need to prepare early.
Did you know that up to 25% of Americans wait until the last 2 weeks of tax season to file their return? If you are a procrastinator, you are in good company.
Unfortunately, it’s not ideal to wait so long to file your taxes. There’s a greater chance of running into issues regarding filing. Plus, you might realize you have missing documents and don’t have enough time to request them.
The best thing to do for a smooth tax filing is to prepare for tax season early. Not only does this help your CPA, but this helps you in more ways than one. At the very least, you get it over and done with, removing unnecessary stress.
If you are looking to get a headstart on tax time for greater peace of mind, follow this short tax checklist.
What Do I Need to File My Taxes?
The first thing you’ll need to do to prepare for tax season is to collect all of the relevant documents. Whether you are doing your own taxes online or letting your CPA handle them on your behalf, having all of your documents together in one place will save time and frustration.
For most people, simply follow this tax document checklist:
- Copy of last years return
- Tax form W2 for employed earnings
- Tax form 1099 for self-employment income
- Deduction records – if you plan on taking deductions for anything, such as medical expenses, interest paid on loans, business expenses, or more, save those records
There are many other possible forms and records required. Check out the latest IRS guidelines for more.
Set Your Expectations
Next up, it helps to have an idea of what you might have to owe, or how much you might receive in return. If you are going to owe money, it sure helps to be aware ahead of time so you can adjust your budget accordingly. Nobody likes a surprise bill.
To do this, take a look at your paycheck to see how much is withheld for taxes. If it isn’t enough, you should expect to owe money. Does it feel like you are paying too much?
You might be in for a nice refund.
Use the IRS tax withholding estimator to get an idea of what should be withheld with each paycheck, and adjust if necessary. After doing that, you can also determine if you qualify for any tax deductions or credits. Take a look at the most common tax deduction checklist to determine what you qualify for.
If you don’t qualify for too many deductions, it might make more sense to take the standard deduction, making everything easier and faster. For some people, however, it’s worth taking the time to itemize deductions, as this will
result in a greater return. Your CPA will likely help you determine the best option for you much quicker.
It’s Not That Hard to Prepare for Tax Season
Whether you are an overachiever, trying to get ahead of the game, or simply trying to avoid unnecessary stress, it’s pretty easy to prepare for tax season. It also helps that we do it every year. So it should get easier and easier. Once you have an idea of how much you might be getting in return or having to pay, and you have your documents organized, you can take the last step.
Schedule an appointment with your CPA sooner rather than later. They’ll appreciate it, and you’ll cross one more thing off your list.