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5 Ways to Prep for the Upcoming Tax Season
Tax season doesn’t have to be a mad scramble to get all of your necessarily forms and payments submitted just under the wire. Rather than waiting until the last minute, keep these 5 simple preparations in mind as tax season approaches.
Determine Which Forms You’ll Need
Depending on whether you’re a self-employed freelancer or an employee at someone else’s business, the type of tax forms you’ll be required to files could be drastically different.
This is a less important step if you e-file your taxes using software such as TurboTax, but if you do file on paper, make sure you understand which tax forms you’ll need.
Make Note of Your Charitable Donations
Donating to charities does more than just make the world a better place; it can also reduce your taxable income. If you’ve made any donations to non-profits, use the IRS’s Tax Exempt Organization Search system to find out if they qualify.
Be aware that a charitable donation will only be of use to you if you itemize your deductions (as opposed to using the standard deduction). You’ll also need proof of your donation, be it a bank record or a written statement from the charity itself.
Collect and Organize All of Your Documents Together
Doing your taxes gets about a million times more difficult if you don’t have all of your required documents properly organized. A system of tabbed hanging file folders is a great way to keep your tax materials sorted. You can divide your documents into receipts, W-2 forms, receipts for deductions, and any other categories relevant to your taxes.
Each time you add a document to your tax file system, consider making a note in a digital spreadsheet. This way, you can know ahead of time if something has been misplaced so that you can more easily obtain a replacement if necessary.
Make an IRA Contribution
If you have an IRA, you should know that you can make contributions at any time up until the tax filing deadline and still have it count for last year. This is an excellent way to help plan for retirement as well as lower your tax bill.
Make sure you fully understand how IRAs work. If you don’t already have one, you may want to set one up (especially if your workplace doesn’t offer a 401K program).
File an Extension if Necessary
Why would you file an extension well before your tax deadline? You may have a very good reason to do exactly that. For instance, if you have a stressful life event coming up (such as a move, wedding, or pregnancy), filing an extension could help ensure you have the time and focus to get everything done correctly. Accountants also tend to have a lower workload after the standard tax deadline has passed, so this option gives you plenty of flexibility.
It’s never too early to start thinking about your annual taxes—especially when you have unique complications in your life. Save yourself a lot of time and frustration by planning and preparing as much as you can.
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