Although the tax deadline is still a few months away, it’s a good idea to gather all relevant documents well in advance of the tax prep rush of early spring. Now is the time to review and organize your annual financial milestones to help ensure a smooth experience.
Review the basics.
A lot can happen in a year. You may enter or leave a marriage or begin caring for someone who qualifies as a dependent, and major transitions like this could impact your tax filing status and change the amount of income you’ll ultimately pay taxes on.
Capture every deduction.
Think about whether you want to itemize or take the standard deduction. If you’re doing your own taxes, taking the standard might be worth it to you for the no-fuss process alone. There may be a chance your itemized deductions exceed your standard amount, however, so review allowable itemized deductions — especially if you’re a business owner, property owner or self-employed.
Report all income.
Yes, all income is taxable. Most wage earners are probably familiar with W-2 forms, and if you’re an independent contractor you’re aware of 1099 forms, but many other income types have their very own kind of 1099 form. If you’re not sure where to start, make a list of all your income sources and move forward from there.
It’s important to keep track of all your financial details over the year, as this will make the filing process much easier to manage.