Tax Season Will Be Here Soon. 3 Tips to Prepare
Taxes are the sort of thing many of us would rather not think about until we absolutely have to. And in that regard, there's some good news.
Tax returns for 2023 are not due until April 15, 2024. So at this point, you have a good three months to get yours together.
However, the IRS will begin accepting tax returns on Jan. 29. And it's in your best interest not to wait till the last minute to file your return so you can get your refund sooner (if applicable) and generally avoid a stressful crunch. In the coming weeks, it's a good idea to make these essential moves so the tax-filing season goes smoothly for you.
1. Line up tax help if you think you'll need it
If your tax situation is fairly simple -- say, you work a salaried job and your only outside income is the interest you earned last year in your savings account -- then you can probably get away with filing your 2023 tax return on your own. But if you took on a side hustle in 2023 and are also looking at claiming multiple deductions, then you may want to enlist the help of an accountant.
The time to line up that help is now. Tax professionals tend to get busy in the weeks leading up to the mid-April filing deadline. So while you don't necessarily need to have all of your tax paperwork ready by the end of January, at that point, you should at least know which accountant, if any, you'll be using this season.
And if you're not sure where to find an accountant, your best bet is probably to ask the people you know. Between neighbors, friends, family members, and colleagues, chances are, someone has a tax professional they can recommend. Get multiple names, though, in case some of those recommendations are already fully booked for the season.
2. Make a list of the paperwork you'll need
The tough part of filing a tax return is coming up with the right paperwork. Look through your records and previous tax return to see what documents were necessary then, and assume that at the very least, you'll need the same information this year as well.
Some of the documents you might need for your tax return include your:
- W-2 wage summary
- 1099 forms, including those from your bank, brokerage account, and freelance clients you worked for
- Mortgage loan interest statements
- IRA statements (so the IRS knows how much you contributed and/or how much you withdrew)
- Charitable contribution records
And this is just a basic list. Your personal list might be longer. Start making it now so you're not left scrambling.
3. Assess your savings in case you end up owing money
It's not a good idea to assume that you'll be getting a refund this year. In fact, if your earnings increased last year, you might end up owing the IRS money.
Those earnings don't only have to be job-related. If you made a lot of money in your savings account in 2023, it counts as income. So do profits in your brokerage account.
Now's a good time to assess your savings and see how much money you have available to pay the IRS should that scenario occur. If you find that you really don't have any available funds to use for a tax bill, you may want to consider expediting your tax return. That way, you'll see early on whether you owe money or not -- and you'll have time to come up with a plan to scrounge up that cash.
You may not be quite ready to think about taxes. But you can only put them off for so long. So make a point to tackle these moves in the coming weeks. It could spell the difference between an easy tax-filing process and a stressful one.
This article was written by Maurie Backman from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
