Although it may seem as if tax season is far away, it is in fact just a short 5 months from now. Now, that still sounds like a lot of time, but as busy professionals, parents, and adults in general know, tax season approaches fast. Instead of being caught off guard (considering the fact it’s the same day every year), here are 9 things you should do now for next year’s taxes.
This post has been written by our talented staff writer, Kimberly Studdard.
Get & Stay Organized
First things first, always keep your tax information organized. You don’t want to be the person scrambling at 11:00pm on April 14th to file your taxes. Keep all receipts, prior tax returns, and any other paperwork in a folder or file cabinet that you can easily access.
It’s critical to have all paperwork, including receipts and statements, on hand should you need to file taxes quickly, or if you get audited. This is definitely something you should do now for next year’s taxes.
Have A System In Place
This is part two of getting and staying organized. Do you plan on filing online or in person? Do you own your own business and use an accounting system? Whatever you do, it’s important to have a system in place that you understand and can use to make filing your taxes easier.
For example, I use an accounting system that helps me track business income and expenses, pay contractors, and pay my estimated taxes, all online. I will also be able to use this system to get a discount on a tax filing service, as they partner with different companies. It’s easy and works for me and my business, and makes filing taxes so much easier!
If you don’t like technology, you don’t have to use it! In fact, pen and paper will work well too, as long as you remember to hold onto it and what you’ve been writing.
Remember The Dates
Unless you want the IRS to penalize you (and if you do, you’re just ridiculous…), this is something you should do now for next year’s taxes. If you have to pay estimated taxes, you should know that you pay them quarterly. The dates to pay estimated taxes are January 15th (following the months of September-December of the previous year), April 15th, June 15th, and September 15th.
If you don’t use an accounting system like I do, write the due dates in BIG letters on your calendar, or on an online calendar. Just remember that you should be paying these estimated taxes on time or you may have to pay the IRS extra in fees and interest.
If you aren’t sure if you owe estimated taxes quarterly, check out this article.
Check Your Withholdings
If you work full-time, make sure to check your withholdings! You may be paying too much to the government, when in reality you can keep more of your cold hard cash. Your HR representative should be able to help with this, but if not, there are a ton of resources online that can answer questions you may have.
Look Into All Deductions and Credits
If you are a homeowner, have kids, have business expenses, donate to charity, or contribute to your 401k, you are eligible for deductions and credits. There are a TON of deductions and credits to look into it, and this is something you should do now for next year’s taxes.
Make a quick list of all the deductions and credits you qualify or think you qualify for, and keep them on hand! That way you know what to expect if you file online (or if your tax preparer doesn’t claim it).
Plan For Changes
Do you plan on moving? Selling your home? Having a baby? Any of these life changes can make a huge difference in filing your taxes. While I’m not saying you have to pop out a baby right before the end of the year (because by the way…it’s not possible unless you’re already pregnant), I am saying to go ahead and prepare to have receipts, invoices, or bills on hand come tax time.
For example, many homeowners qualify for credits that renters don’t. So if you plan on buying or selling a home, remember that it may make a difference during tax time. The best way to plan for these is to talk to a professional, or to use an online tool that can calculate what you may owe or receive based on the information you provide.
Plan To Pay (Or Receive) Money
If you haven’t done it before, here’s something you should do now for next year’s taxes. Budget!
If you plan on owning money, start saving now. If you plan on receiving money, start planning now. Don’t get a refund just to spend it all on TVs and vacations. Instead, plan to pay off debt if you have it, save money, or even start investing. There are ways that can tell you whether to expect to owe money or receive money, but remember to check twice.
This is really only something I recommend to those that plan on owing taxes. If you don’t want a huge tax bill during tax season, I highly suggest spending MORE money on business related expenses, or giving more to charity/investing.
I know that sounds crazy (make money just to spend it?), but it has helped me. The more you spend, theoretically the less you owe. If you are already investing in your business, giving to charity, or saving for retirement, just ramp it up a bit. Don’t spend money just for the sake of it, and you don’t have to spend thousands (unless you can afford it). But if it benefits you and your business, go for it.
Hire A Professional
If you are doing all of the above, you should be well prepared for tax season next year. However, hiring a professional to keep track of everything can give you peace of mind, save time, and even get or keep you a few more dollars in your wallet. While hiring a professional isn’t 100% necessary, it’s something you could look into.
So there are the 9 things you should do now for next year’s taxes. And while you’re at it, go ahead and do this every year, so tax season doesn’t surprise you ever again!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.