While you won’t find tax season on your usual calendars, it can be a financially significant time of year for American families.
A major reason for this importance is those tax refunds that you might qualify for. With the average tax refund at $3,167, that money can be a huge help for families looking to hit their financial goals.
Although the IRS has not officially announced the tax season opening date for tax year 2024, typically the IRS starts accepting tax returns for the previous year around mid to the end of January. If you prepare ahead, you can then file as soon as possible which can help you get your tax refund sooner!
The good news is that getting prepared is not as hard as you think. The key, though, is to have a system.
An Easier Way to Prepare for Tax Season
There are three crucial pieces in preparing for tax season.
The first is making sure your finances are optimized. Next, you want to review and organize your tax documents. Finally, you want to have a plan for when you’re ready to file your tax returns.
With families being busy, it’s easy to skip certain financial check-ups, but these seemingly small tasks can have a big impact.
Optimize Your Paycheck and Tax-Advantaged Accounts
The first place you should look at optimizing is your paycheck.
You want to make sure that you’re getting the right amount withheld. Make sure you have enough taken out so you don’t owe taxes come filing season. This gives you the option to not give up too much money ahead of time and then have to wait for tax season to get the refund of the excess taxes you had withheld. You do have the freedom to adjust your withholding depending upon whether you want a bigger tax refund or more take-home pay. Just make sure you don’t owe money when it comes time to file your taxes. Use the free TurboTax W-4 withholding calculator to help you easily estimate your withholding and fill out a new Form W-4 to give to your employer.
When you first started your job, one of the first forms you completed was your W-4. While it may have been accurate then, you may have had some life changes that affect your withholding. LIfe events like getting married, giving birth to a new baby, or having other dependents will affect your W-4 calculation.
Big life events like purchasing a home this year may also have an impact on how much withheld from your paychecks. If you are able to itemize, you may be eligible for bigger tax deductions like a home mortgage interest or property tax deduction which will further reduce the taxes you owe. Account for these changes when adjusting your tax withholdings on your W-4.
Investing in and selling stock has been on the rise over recent years. If you sold any stock this year and had a capital gain, make sure you take that into consideration and adjust your withholding or pay estimated taxes if you anticipate having a substantial gain during the year. This will ensure you have paid enough tax payments in to cover any potential taxes due with the additional income flow.
Next, you want to make sure you’re properly using your tax-advantaged accounts. These can include your 401(k), flexible spending accounts (FSAs), and health savings accounts (HSAs).
If possible, see if you can max out these tax-advantaged accounts. Two major advantages of these options are saving with pre-tax money and lowering your taxable income.
If you have kids, you can also set aside money for their college/trade school education in a 529 plan or Coverdell Education Savings Account (ESA). Some states provide tax breaks for contributions to these accounts so be sure to see if your state offers any of these perks.
As you can see, there are plenty of opportunities to optimize your accounts and lower your taxes before tax season!
Organize Your Accounts and Documents
With your tax-advantaged accounts in a better spot, we can now focus on getting your paperwork from your job, bank, and other financial institutions organized.
Having your documentation ready to go will save you plenty of time when you file your taxes.
With TurboTax, you can import your Form 1099s directly from your financial institution. TurboTax automatically imports investment transactions from hundreds of financial institutions to eliminate time and improve accuracy.
Second, make it a point to look at your money once a week. The first time you review your money might take a a bit longer since you aren’t used to reviewingyour family finances. You want to scan transactions for about 5-10 minutes to make sure nothing out of the ordinary is happening.
Reviewing and optimizing your finances will not only help you during tax season but put you in a great spot to build up your wealth.
As for documents, you may receive statements quarterly or documents specific to the tax filing season. A great way to keep things in order is by having a folder system. You can use color-coded folders to hold receipts for expenses, checks and notes about deposits, and any other financial documents you may need during tax season. These minor changes in how you store relevant tax return items could save you a lot of hassle come tax time.
Having those documents handy can aid in reviewing the paperwork to ensure there are no inaccuracies. Waiting until the rush of tax season can get overwhelming and possibly result in delays reviewing any records you need to use to prepare your tax return.
You can use QuickBooks Self-Employed to track your business income, expenses, mileage, and capture receipts year-round, and then automatically export your information to your TurboTax Premium tax return, eliminating data entry.
Make Plans for Filing your Taxes
When tax season rolls around, you will get any applicable W-2 forms, 1099s, or forms to support your possible deductions. Make sure you keep these forms together as you receive them.
You will then be able to gather these forms along with the other documents you have been keeping together over the year and use them to prepare your tax return.
No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.