Tax season can feel overwhelming if you’re scrambling to find receipts, organize paperwork, and make sense of your finances at the last minute. The good news? A little planning throughout the year will set you up for success come April.
Whether you’re self-employed, working a 9-to-5, or juggling multiple income streams, these tips will help you stay on top of your taxes - and save time and money in the process.
1. Keep Your Documents Organized
Don’t wait until April to start hunting for paperwork. Set up a system to keep track of everything as you go.
Create a Filing System: Separate receipts, pay stubs, and invoices by category (e.g., medical expenses, charitable donations, or business expenses).
Save Important Documents: Keep track of W-2s, 1099s, mortgage statements, and any forms related to investments or retirement accounts.
Track Deductions: If you qualify for deductions like home office expenses or student loan interest, maintain a record of those throughout the year.
2. Review Your Tax Withholding
Your tax withholding determines how much is taken out of your paycheck for taxes. Too much withholding means you could miss out on extra income throughout the year. Too little could leave you with a big bill at tax time.
Check Your W-4: If you’re an employee, review your W-4 form to ensure your withholding matches your current financial situation. Major life changes like marriage, a new job, or having a child can impact your taxes.
Estimate Quarterly Payments: If you’re self-employed or earn income outside of a traditional job (e.g., freelancing), consider making estimated tax payments quarterly to avoid penalties.
Pro Tip: The IRS provides a withholding calculator to help you adjust your W-4 or plan quarterly payments.
3. Keep Track of Major Life Changes
Certain events can have a big impact on your taxes. Plan ahead for these milestones:
Getting Married or Divorced: This can affect your filing status and potential deductions.
Having a Child: You may qualify for new credits, such as the Child Tax Credit or childcare deductions.
Buying or Selling a Home: Mortgage, interest, property taxes, and capital gains could affect your return.
Starting a New Job or Side Gig: Keep records of any income and related expenses, especially if you’re self-employed.
Tip: Notify your tax preparer of any major life changes so they can help you adjust your strategy.
3. Maximize Tax-Advantaged Accounts
Certain accounts allow you to save money on taxes while planning for the future. These include:
Retirement Accounts: Contribute to accounts like a 401(k) or IRA. Contributions may be tax-deductible, and many employers offer matching contributions for 401(k)s.
Health Savings Accounts (HSAs): If you have a high-deductible health plan, contributing to an HSA allows you to pay for qualified medical expenses tax-free.
Education Savings Plans: Accounts like a 529 plan can help you save for education expenses while offering potential tax benefits.
Contributing to these accounts reduces your taxable income, so it’s a win-win. Just remember to make contributions before the year-end deadline to claim them on your taxes.
4. Monitor Changes to Tax Laws
Tax laws can change from year to year, impacting deductions, credits, and filing requirements. Staying up-to-date ensures you don’t miss out on savings or make errors.
Follow Updates: Check the IRS website or consult with a tax professional to stay aware of any changes that could affect you.
Keep an Eye on Deadlines: Tax deadlines can vary depending on your filing status or type of income. Knowing them ahead of time helps you avoid penalties.
5. Keep Track of Tax Credits and Deductions
Credits and deductions can significantly lower your tax bill, but only if you know what to look for.
Popular Tax Credits: Earned Income Tax Credit (EITC), Child Tax Credit, and education credits like the Lifetime Learning Credit.
Common Deductions: Charitable donations, medical expenses, state and local taxes (up to $10,000), and mortgage interest.
6. Save for Your Tax Bill
If you’re self-employed or a contract worker, don’t wait until the deadline to save.
Set Aside Money Monthly: If you’re self-employed or paying estimated taxes, build tax savings into your monthly budget.
Create a Separate Account: Use a dedicated savings account for your tax payments to keep the funds safe and separate from other expenses.
7. Review Your Return from Last Year
Last year’s tax return can be a valuable tool for planning.
Spot Missed Deductions or Credits: This can help you avoid leaving money on the table.
Find Trends: If you owed money last year, consider adjusting your withholdings or estimated payments.
Use It as a Checklist: Refer to your old return to make sure you’ve gathered all the necessary forms.
8. Create a Tax Season Checklist
As tax time approaches, having a checklist can ensure nothing slips through the cracks.
Collect all W-2s, 1099s, and income forms.
Gather receipts for deductions, such as medical expenses or charitable donations.
Review bank statements for potential write-offs.
Double-check your Social Security number and filing status.
Schedule a meeting with your tax preparer or plan to file early.
9. Stay Ahead of Scams
Tax season often brings an increase in scams. Protect yourself by:
Avoiding unsolicited emails or phone calls claiming to be from the IRS.
Using secure methods to share sensitive tax information.
Verifying any preparer or professional you work with.
Reminder: The IRS will never contact you by email, text, or social media.
10. Work with a Trusted Tax Professional
Navigating tax laws and uncovering every potential savings opportunity can be daunting. Working with a tax expert can:
Simplify the filing process.
Maximize deductions and credits.
Reduce the risk of errors and audits.
At AMG Finance, we understand how overwhelming tax season can feel. Our tax professionals ensure your return is accurate and optimized for the best results.
Take the Stress Out of Tax Season
Don’t wait till the last minute. Start with small steps, like organizing your documents or checking your withholding, and build on those efforts throughout the year. By implementing these tips now, tax season will feel less like a burden and more like an opportunity to take control of your finances.
If you’re ready to simplify the process and maximize your return, contact AMG Finance to learn more about how we can make tax season a breeze for you.
