Want tax season to go by smoothly this year? Then you should start preparing now. In this article, we will go over 5 steps that will help you to prepare for tax season.
1. Understand Your Filing Status
There are five potential filing statuses. These include single, head of household, married filing jointly, married filing separately, and qualifying widow/widower with a dependent child. The status you choose will determine your standard deduction. It will help you to qualify for certain deductions and credits.
2. Update Personal Information
There are certain situations you should update the IRS about. These include moving, getting married, divorcing, or name changes. There are 3 ways you can update your address with the IRS. These include calling the IRS, mailing in a change of address form, or updating information when you file your tax return. The only issue with waiting to change your address when you file is that you may miss important IRS communications.
3. Organize Your Tax Documents
Typically, your tax documents will not start showing up until the end of January. Some of the documents you should be on the lookout for include:
- W2-this is the report of your total income and withholdings for the year from your employer.
- Form 1099s-if you are self-employed, you will receive these forms from your clients. They show how much they paid you for your services.
- Form 1098-this form details the total amount of mortgage interest you paid for the year.
- 1099-DIV-if you had income from dividends or distributions related to your investments they will be reported here.
- 1098-E-on this form you student loan interest will be reported.
- 5498-if you contributed to an IRA your total contributions will be reported on this form. However, the amount you contribute is only deductible as long as it stays under the IRS thresholds.
- 1095-A-if you had health insurance through the marketplace this form is your statement. You may get a premium tax credit to offset healthcare costs or reconcile the credit with advanced payments you may have received.
If you have a business, throughout the year you should be keeping track of bank statements and receipts. It helps if you reconcile accounts through regular bookkeeping. Keeping track of your expenses can potentially help to reduce your tax liability.
4. Maximize IRA Contributions
IRA contributions are tax deductible. You should contribute the maximum amount allowed. For 2025 this amount is $7,000. However, if you are over 50 the contribution limit is bumped up to $8,000.
5. Adjust Your Withholdings
Every year your employer should have you fill out a W4. This determines how much tax you want withheld from your paycheck. If you owed taxes last year, you need to increase your withholdings because you are not withholding enough.
You Can Prepare for Tax Season
By applying these 5 tips you can successfully prepare for tax season. Your tax preparer can also help you prepare for more complicated situations.
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