10 Killing Steps to Take Before You Prepare for Tax Season 
Written by Ahad&Co
Tax season is back. Are you worried about tax season preparation? If you are, you are in the right place.
During the pandemic, taxes have grown to become increasingly complicated. Multiple new exemptions and deductions have been included. With all the trends, it is imperative to prepare and be ahead of the process.
You can either prepare on your own for the tax season in 2022, or you can reach out to a tax accountant to help you with the same. Discussed below are 10 steps that will help you prepare for the tax season. You can start putting these steps into action by November or December every year.
1. Get Started Early and Start Prepping Your Tax Returns
Enough importance has been given to the fact that it is best to start early. With new additions making it more complicated, this tax season requires prior preparation like no other.
It is advisable to create a plan. There is various tax preparation software that can help you with the same.
You can start by creating a checklist of all income-related documents from both work and investments. Most of these are usually available at the beginning of the year.
In addition to this, make a list of all the expected income paperwork. Forgetting to include even one of these while filing your returns could lead to unwarranted problems.
2. Gather Important Tax Documents
Accurate paperwork is one of the key elements of filing your taxes. It is advisable to store all related documents on a timely basis in an organized fashion.
Typical documents you might need to file your taxes include (but aren’t limited to):
- W-2s from employers
- 1099s form reports other income you received, such as dividends, interest, nonemployee compensation paid to independent contractors.
- Documents show medical, educational, childcare, or other expenses, especially if you’re itemizing.
- Statements regarding investments or mortgage interest payments (Form 1098)
- Form W-2G if you had certain gambling winnings.
Creating a digital folder to store these will help ensure that all documents are stored and available for easy access later.
It is advisable to keep receipts of your deductible expenses, charitable donations, etc. This will help you file your returns and ensure that all deductibles claimed by you are accounted for.
3. Gather Information about Dependents
In addition to listing your own personal information, it is also important to gather details pertaining to any dependents that you may include in your tax returns. Careful collection of these details in a safe and secured manner is vital.
For divorced individuals, it is essential to decide which parent claims which child for the tax year to avoid overlapping. Purchase and sale of rental properties and vacation homes need to be documented accurately. The dates of purchase or sale and buying or selling amount need to be noted.
4. Double-Check Personal Information with Your Employer
One way to make sure that there is no delay in receiving your W-2 from your employer is to ensure that HR has all your accurate details. This is a practice that can be adopted with all concerned parties. It is advisable to double-check your personal details with all those that are expected to send you tax documents. This includes the bank, IRA provider, your workplace, your child’s educational institution, and so on.
5. Plan if You Might Owe Taxes
One of the best ways to ensure that you pay your owed taxes in time is to prepare for it and plan ahead. There are multiple strategies that you can adopt to prepare for the same.
Put aside small amounts over a period to save towards paying your taxes. Instead of making a single large payment, it is advisable to set aside smaller chunks from as early as November. This will help ensure that you have enough needed by April and help avoid any delays.
Increased contributions and donations to charity is another way to reduce the taxes that you may owe. Maximizing on these fronts helps you reduce the taxable income.
Having an accountant or tax attorney on board is always a benefit. They will be able to help you identify ways by which you can reduce your tax burden.
6. Plan for Potential Tax Refunds in Advance
If you are expecting a tax refund, there are multiple ways by which you can plan and prepare for it.
Some or all your refunds can be directed towards taxes for the following year. If you are someone that pays estimated taxes around the year, this is one method to help you cover the installment for the first quarter.
You can also decide how and where you want these refunds deposited. You can either choose to receive a paper check via email or route the refund to be deposited into your account directly.
You can use some or all the refund amount to invest in elements like IRAs, various savings such as health and education, or deposit them in bonds.
7. Renew Your ITIN If Necessary
Another point to note is that if your ITIN has any of the following digits as its middle digits, then it is expired and requires renewal. 88, 90, 91, 92, 94, 95, 96, 97, 98, or 99, ITIN having any of these middle digits is expired. However, you can submit the renewal form for the same when you file your tax returns, thus making it an easy process.
8. Research Professional Tax Preparers
It is quite normal to feel overwhelmed by the processes and paperwork involved in the process of filing your tax returns. If you feel like you cannot handle the process yourself, it is advisable to employ professional help. There are a number of professionals that offer tax services and can help you with the same.
When choosing a tax professional to help you ensure that they have a valid Preparer Tax Identification Number. This signifies that they are authorized to perform the filing of tax returns on behalf of others.
9. Finalize Contributions for the Year
You can use multiple channels to finalize your contributions for the coming year, namely, retirement plans, health savings, educational deposits, and so on. For contributions towards retirement plans, the amount qualifies for tax deductibles. The amount varies based on your age.
10. Stay Updated on the News from the IRS
It is crucial to stay updated on the news being published by the IRS. While preparing for the tax season, it is vital to take a careful look at your finances.
The Bottom Line
Once you have a system in place, it gets easier to put this process behind you every year in the most efficient manner.
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