Finance
Five simple steps to start preparing for tax season
Tax season doesn't have to be stressful! Here are some tips to help you prepare.
Like many Americans, I loathe tax season. Collecting documents, filling out forms, sending money to Uncle Sam; it adds up to a process that I don't enjoy.
Still, it has to be done each year, and the time to do so is nearly upon us. Here are a few steps to take before actually filing your taxes that make the filing process that much easier.
Tax Preparation Tips
- Securely save each and every tax form that arrives in your mailbox. Designate a specific place to put all of those W-2s, 1099s and other statements as they arrive. For years, I've simply put my family's tax documents in a single manila envelope and put the envelope in a secure place with other important documents. When a new tax document comes in, I just simply stick it in that folder.
- Figure out how you're going to prepare your taxes. Are you going to use a tax preparer? Are you going to use software and do it yourself? Are you going to do it manually? If you choose to do it yourself, it's probably time to start gathering your materials. My family uses TurboTax when we're ready to file.
- Contribute to your Roth or Traditional IRA. If you've been thinking about opening or contributing to a Traditional or a Roth IRA, those contributions count for the previous year (2021) up until the tax filing deadline of the following year (the deadline for tax season 2022 is April 18). If you're still on the fence, your window of opportunity has not yet closed. You can make those contributions as long as you do it before you file.
- Think (and talk) about changes in your filing status. Did you get married or divorced in the past year? Did you have a child? Did one of your children spread their wings, no longer qualifying as one of your dependents? These things will all affect your taxes. Not only that, many of these changes affect what happens on other people's tax forms. It's worthwhile to talk to the people involved and make sure everyone is claiming things correctly this tax season.
- Be ready to file for an extension if necessary. Sometimes, taxes end up being more complex than you expect. At one time, I had issues receiving tax documents from a company that had paid me, and the issue continued after the deadline. Thankfully, it's very easy to receive a six-month extension on your filing; just filll out Form 4868 and submit it. You have to make a payment equal to your estimate of what you will owe, but this stops you from incurring any penalties while you're tracking down final details.
Tax season is enough of a headache. Little steps like these can really help to take the edge off.
[This article was originally published on The Simple Dollar in January, 2020. It was updated in December, 2021.]