You are probably still stinging from the pain of filing your 2021 income tax return. That pain might have been sharper if you had to pay when you filed. The memory of that pain could be just the incentive you need to start preparing for next tax season now. Starting to prepare for next tax season now reduces stress and gives you time to implement tax planning strategies early in the year.
Whether you file your own tax returns or engage a tax professional, these three tips will help you prepare for next tax season now:
- Check Withholdings and Estimated Payments
Did you owe a lot when filing your 2021 returns, or did you get a big refund? Either way it turned out for you, the IRS has online tools to help make sure that your tax withholdings or estimated payments will cover your anticipated tax liability. Employees who earn wages should use information at this link to verify that their tax withholdings are sufficient https://www.irs.gov/individuals/tax-withholding-estimator. Taxpayers with investment, self-employment or other non-wage income should use this link to figure out their quarterly estimated tax payments due in April, June, September, and January https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes.
- Organize Tax Documents
Use your 2021 tax return to identify documents that you’ll need to accumulate in preparation for next tax season. Start printing the charitable donation letters and real estate tax bills to cut the delay when the 1099s and W-2s are released or mailed to you. As life events happen in 2022, such as buying a home, starting a business, or changing your marital status, check into how the event impacts your taxes. You might need a tax professional to help you plan for and understand the tax impacts of life changes.
- Pending Tax Changes
The last two tax filing seasons involved reporting some unusual information that was related to pandemic tax changes, like the expanded Advance Child Tax Credit and Economic Impact Payments. As of today, no tax law changes are pending; however, you never know. Keep an eye on the news for any announcements indicating that a law is about to pass and see if it could impact next year’s tax reporting. Keep in mind that a reporting change could happen even if the change does not impact your tax liability,
If the pain of filing your 2021 income tax return is still stinging, these tips to prepare for next tax season now are just what you need. Preparing now not only reduces stress; the earlier in the year you start, the more time you have to implement tax planning strategies. Whether you file your own tax returns or engage a tax professional, checking your withholdings and estimates, organizing you tax documents, and being aware of tax law changes will go a long way to help you prepare for next tax season now.