During the autumn season, taxes may be the furthest thing from your mind. October is a great time to enjoy the changing leaves, cozy sweaters, and all things pumpkin. But it’s also a great time to begin taking stock of your financial health to prepare for tax season.
Einstein once famously said, “the hardest thing in the world to understand is the income tax.” While that might not be exactly true (theory of relativity, anyone?) taxes can be complicated. Here are some things you can do in advance that will make tax season feel as easy as learning your ABCs.
- Make tax-deductible donations before your financial year ends
If you’re planning to do any charitable giving and haven’t yet, then make your donations before the year ends. Not only will it boost the finances of an organization or cause that you care about, but it will also count toward your total deductions for the year. Win-win!
- Max out your tax-advantage accounts
If you have the extra cash, make the maximum amount of contributions to your retirement accounts or health savings accounts. For traditional IRAs, you can contribute up to $6,000. If you have an HSA, you can save $3,600 for single coverage or $7,200 for family. These contributions reduce your taxable income and sets aside income for the future.
- Schedule regular tax planning all-year round
You don’t have to wait until April 15th to deal with taxes. It’s possible to set up quarterly payments so you can review your cash flow more regularly and avoid big, unpleasant surprises. This strategy is especially effective for freelancers and small businesses who often face large fluctuations in income and expenses.
- Maintain sufficient records
Keep a file of important financial information, records, receipts, and payments to the IRS. That way, you have everything you need in one place. Having easy access to your records will allow you prove your expenses, income, and most importantly that you’ve paid everything you owe.
- Get your paperwork organized
If you’ve paid taxes before, then you know it involves extensive paperwork. When it comes to tax preparation, it’s important to have all your critical documents ready before you file so you can avoid mistakes and find all eligible deductions.
- Make a tax payment plan
If you think you might owe money to the IRS, prepping for tax season early gives you time to plan and save. Putting away money to pay your tax bill is the best option, but if your bill drains your savings, you can also set up a payment plan with the IRS, use a credit card, or take out a loan.
- Consider how you’ll use your refund
If you’re looking forward to a tax refund, be smart about your extra windfall. Consider using your refund to further your financial goals like boosting emergency savings, paying down debt, or growing your nest egg.
- Hire a good financial professional
If you feel confused about your taxes, you’re in good company. Almost 90% of Americans hire a professional or use software to help them file. The American tax system is notoriously complex, so if you want to feel confident about your tax preparation, then work with a trusted professional for expert tax services.
Neely’s can help with your tax preparation
Neely’s is Roanoke’s trusted source for tax services and tax preparation. For over 30 years, we’ve helped individuals, freelancers, and small businesses in Roanoke and Vinton face tax season with confidence. Contact us today to learn more about how we can make this tax season your smoothest yet.