Here are several ways taxpayers can prepare and stay organized:
1. Gather and Organize Your Documents Early
• Income Statements: Collect all W-2s, 1099s, K-1s, and any other income-related forms. Including freelance, investments, rental, and other side jobs.
• Deductions and Credits: Gather receipts or statements for deductible expenses (medical, charitable donations, business expenses, etc.). Keep track of any credits you are eligible for, like education or child tax credits.
• Bank Statements: Have bank statements and records of interest or dividends earned throughout the year.
• Retirement Contributions: Include any contributions made to retirement accounts, such as IRAs, 401(k)s, or other savings plans.
• Real Estate Documents: If applicable, gather documents related to mortgage interest, property taxes, and home sales.
• Other Forms: Don’t forget about other important forms, such as 1098s for mortgage interest, 1095s for health insurance coverage, and 1099s for investment income.
2. Keep a Tax Folder or Binder
• Physical or Digital Folder: Create a dedicated folder (physical or digital) where you can store all tax-related documents as they come in. This helps you keep everything in one place and ensures you won’t overlook anything when it’s time to file.
3. Track Mileage
• Mileage Log: If you drive for work or business, use a mileage tracking app or manually record your mileage. Keep all receipts for gas and maintenance if you plan to deduct these expenses instead of using mileage. You can only use the mileage deduction OR the actual expenses, NOT both
4. Review and Update Your Tax Withholdings
• Check Withholdings Mid-Year: Use the IRS withholding estimator tool to see if you’re withholding enough tax from your paycheck. If necessary, adjust your W-4 form with your employer to avoid surprises at tax time.
• Quarterly Estimated Taxes: Self-employed individuals or those with additional income should keep track of their estimated quarterly payments and ensure they’ve made all necessary payments.
5. Review Your Last Tax Return
• Last Year’s Return: Reviewing your previous year’s tax return can help you spot any deductions or credits you may have missed, plus it helps you understand what to expect this year. Look for recurring sources of income or deductions that you’ll need to report.
• Carryovers: If you had carryovers from previous years (e.g., unused credits, deductions, or losses), make sure to track them for the current year’s filing.
6. Review Any Life Changes
• Marriage, Divorce, Children, or Other Major Life Events: Life events can significantly impact your tax situation. Review any changes in your circumstances, such as getting married, having children, moving states, or starting a business, and be sure to adjust your filing status or deductions accordingly.
• Education: Keep track of tuition payments or student loan interest as they may qualify for tax deductions or credits.
