Once tax season is over, it’s easy to ignore anything that has to do with taxes until next year. But instead, you should be proactive so tax season doesn’t sneak up on you. To help you get organized, try these tips below to plan for next year’s income tax return, and remember: the sooner, the better.
Analyze This Past Year
Look back at your income tax return and review what went well and what could be improved. Make a list of what helped you reduce your tax bill. If you had deductions – education costs, for example – but won’t be able to deduct them next year, brainstorm other ways to balance this future loss.
Of course, you can’t see the future, but you can plan for it. Will your income tax situation change? For example, starting a family will increase your number of dependents and potentially reduce tax liability. Many life changes, such as buying or selling a home or starting your own business, may require you to take action like adjusting the amount withheld for taxes from your paycheck. Continue to be aware and stay on top of how these changes can affect your taxes. And be sure to use our withholding calculator to help you plan.
You may be able to lower your taxes if you take the itemized deduction route instead of using the standard deduction. Itemizing can mean a larger deduction, but to do it you must maintain accurate records of things such as charitable contributions, job-related expenses that are not reimbursed by your employer, and eligible medical expenses. You will also need to attach a Schedule A to your Form 1040. If you keep track of all these qualifying expenses throughout the year, you’ll save yourself a lot of time — and headaches — at the end of the year.
Keep Records Organized and Safe
Have a designated place where you and your family keep tax records and important documents. Our tax organizer tool is free and easy to use and can help you keep track of your tax information. Searching for misplaced files and records can be stressful and can make the next tax season difficult. Make sure to keep these records, such as last year’s tax return, safe and accessible. Also, be sure to back up all records you keep on your computer. There are many free ways to back up your data, especially now that iCloud storage is becoming a safe and popular way to store information. Even if you have to pay someone to help you set up a storage system, it’ll be worth it in the long run.
Nothing’s worse than being unaware of tax issues that can directly affect you. Stay up-to-date on the tax code, such as the newest changes to the PATH Act (Protecting Americans Against Tax Hikes), which is a specific bill updated regularly to extend certain credits and deductions while allowing others to expire.
Fortunately, there’s an easy way to keep up with current tax laws. Subscribe to our free newsletter to receive regular tax tips so you can prevent any surprises for next year. Or you can save yourself the headache and work with a tax preparer. Use our store locator to find a tax preparation specialist near you.