With the holidays (almost) behind us, tax season will soon come around, and while in contrast to the holidays, it is one of the most dreaded times of the year, planning can make it much easier and less stressful for you.
There are several ways you can prepare for tax season, including:
- Get organized by collecting your tax-relevant paperwork ahead of time. Once you receive tax documentation for your last year’s employment, for example, dedicate a folder specifically, either physical or virtual, for the documentation you will need when the time comes for you to file taxes.
- Make a list of all sources of your income for the previous year, including employment, passive income, inheritances, cash payments, and all other money received, which you must report to the IRS.
- Make a list of all charitable donations you have made. If you donated clothing, food, money or other physical items, save the receipts for those donations.
- If you work from home, you may be able to deduct certain expenses related to your home office, such as necessary equipment for your job and, in some cases, a portion of your electric and internet bills.
- If you expect to receive a tax bill, start putting money aside every month or every paycheck to prepare for what you owe. Setting money aside can save you significant stress, in addition to helping you develop a habit of setting money aside regularly for future expenses.
Tax season is not the most fun time of year. However, with proper preparation, it does not have to be overwhelming or even unpleasant.
If you decide to have someone help you with your taxes, now is the time to determine who that individual or company will be, and it is not too early to contact them. Remember, they probably have many other clients too, so reaching out to them now will also be helpful to them.