If you want to avoid last-minute tax stress, there are a few easy steps you can take throughout the year that will make the filing process smoother and more efficient.
Keep your tax documents organized
Establish a method to store all important tax-related information in one place. You can either use digital tools to manage electronic files or set up physical folders that are clearly labeled by category. Add documents to your system as you receive them, rather than waiting until tax season.
Keeping your records in order will simplify the process of preparing your return. It may also help you identify tax deductions or credits you might have missed otherwise.
Determine the correct filing status
Your filing status has a significant effect on your eligibility for certain tax benefits. If more than one status seems to apply to you, visit the IRS Interactive Tax Assistant online and use the tool titled “What’s my filing status?” for guidance.
Major life changes such as getting married, divorcing, having a child, or losing a family member can affect your filing status. Choosing the correct status is essential to ensure accurate tax reporting.
Understand your adjusted gross income
Your adjusted gross income, or AGI, is the total of all income you earn during the year minus specific allowable adjustments. A higher AGI can lead to a higher tax bill. Proactive tax planning can help you find ways to reduce your AGI and, in turn, lower the amount of tax you owe.
Review your tax withholding
Taxes are typically paid gradually through paycheck withholding. It is important to confirm that enough is being withheld from your income to cover your expected tax liability.
If your income or personal circumstances change during the year, use the IRS Withholding Estimator available on the IRS website to determine if you need to update your withholding. Submit a new Form W-4 to your employer if changes are necessary.
Update your name or address promptly
If you move, inform the United States Postal Service, your employer, and the IRS as soon as possible. To officially change your address with the IRS, complete and submit Form 8822. Instructions for submitting the form are included on the second page.
If you change your name, notify the Social Security Administration to avoid delays when you file your return. Making these updates early ensures your return can be processed without complications.
Contribute to a retirement account
Putting money into a retirement account can reduce your taxable income and help lower your AGI. Contributions to workplace retirement plans or traditional individual retirement accounts can provide significant tax advantages.
Planning ahead pays off
Taking time throughout the year to stay organized and proactive can lead to a more efficient and less stressful tax filing experience. Small steps now can make a big difference when it comes time to file your return.
