Tax season just ended a couple weeks ago, and while preparing for next year’s tax return is probably the last thing you want to think about – it’s important to stay organized and make any adjustments for next year now, while it’s still fresh on your mind. Even though April 15th comes around every year like clockwork, it tends to sneak up and turn into a last-minute scramble for many of us. Here are a few tips on how to prepare for next year’s tax season now, to make things less stressful and more manageable later.

Make a Tax-Related Documents Checklist

An easy way to prepare for tax season is to make a simple checklist of the information and documents you will need to receive before you file. A checklist will help ensure you file accurately and keep an eye on what’s still outstanding.

Below are some examples of documents you might need to file your taxes next year that you can start putting aside this year, depending on your situation:

• Documents related to childcare or dependent care expenses.
• Receipts for books, tuition, and other education expenses if you’re a student or teacher.
• Medical and prescription receipts.
• Charity donation receipts or proof of payment.

Check out this IRS webpage on common documents and tax forms you might need to file your taxes. It’s important to remember that this isn’t an all-inclusive list and not all listed documents and forms will apply to everyone.

Decide How to Organize Your Tax Records

Are you more of a physical or digital recordkeeper? Choosing a method for organizing your tax-related documents makes it more likely that you will organize documents as you receive them.

A few options for organizing your tax-related documents can be a physical folder, digital folder on your device, or an accordion folder – especially if you have many categories of documents.

Track Income and Expenses Monthly

Tracking income and expenses is especially important if you do side gig or freelance work or own a small business – self-employment income is not the same as income reported on a W-2. Tracking can be done with a spreadsheet, a budgeting app, or something as simple as the notes app on your phone. Setting time aside to track income and expenses monthly can help you avoid surprises when it’s time to file and assist you in planning ahead.

Keep Track of Life Changes That Could Impact Taxes

Don’t forget about any career changes, getting married, or your first-time home purchase come tax time! Aside from changes to legislation, life events are one of the main causes of impacts to your tax outcome. They can affect your refund or how much you may owe the IRS.

Here are some life events that might impact your tax outcome:

• Getting married
• Growing your family
• Starting a new career or experiencing job loss
• Buying or selling a home
• Retiring

The IRS has resources that explain the potential tax impact of various life events.

Create a Plan if You’re Expecting a Refund

Having a plan for a tax refund before you receive it is an important and often overlooked aspect of tax season preparation. Without a plan, it’s common for tax refunds to be spent on impulse purchases or go to everyday spending as opposed to long-term financial goals. Having a plan for any funds you get back at tax time will help you know exactly what to do when the refund arrives.

If you want to make the most of your refund by saving, making a large purchase, or planning for your financial future – First Financial is here to help!

Benefits of Preparing Early

There are numerous benefits to preparing for tax season early:

• Stress Relief: Tax season stress usually comes from feeling unprepared or rushed, especially as the deadline gets closer. Getting started ahead of time can help you file with confidence – and not second-guessing whether you filed all your documents.
• Avoiding Errors: Rushing through your taxes can lead to errors – such as skipped documents, incorrect numbers, or even missed deductions.
• More Time to Prepare: Being ready to file early gives you time to plan. Especially in the case of owing money – if you know you usually owe each year, you can start putting aside some money into a savings account all throughout the rest of this year to avoid scrambling at the last-minute next year.

With a few smart habits, you can make sure that tax season doesn’t catch you off guard next year.

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