Lower Tax Season Stress By Preparing These Things Now

Dec 19

As the year winds down, December is the perfect time to get a head start on tax season. By taking a few proactive steps now, you can save yourself stress and potentially even money when it’s time to file your taxes. Here’s how you can prepare in December to ensure a smooth tax season.

1. Gather and Organize Your Documents

Start by creating a folder (physical or digital) for all your tax-related documents.

Key items to include:

Income Statements: W-2s, 1099s, or other proof of income.
Expense Receipts: Any deductible expenses, like charitable contributions, medical expenses, or educational costs.
Tax Forms from Investments: 1099-B for stock sales, 1099-DIV for dividends, etc.
Personal Information: Social Security numbers for yourself, your spouse, and dependents.
Tip: Use a checklist to ensure you don’t forget any important documents.

2. Review Your Income and Deductions

Now is a great time to evaluate your income and expenses for the year:

Maximize Tax-Advantaged Accounts: Contribute to retirement accounts like IRAs or 401(k)s and Health Savings Accounts (HSAs) to lower your taxable income.
Check Eligibility for Tax Credits: Look into the Earned Income Tax Credit (EITC), Child Tax Credit, or other credits.
Assess Charitable Donations: If you plan to itemize, consider making additional charitable donations before December 31.

3. Make Last-Minute Adjustments

Taking action before the year ends can make a big difference:

Adjust Withholding: If you’ve had significant income changes, ensure your withholding is sufficient to avoid surprises.
Defer Income: If possible, push income into January to reduce your taxable income for the current year.
Sell Losing Investments: Offset capital gains by selling investments that have lost value (tax-loss harvesting).

4. Update Personal Information

Ensure that your records are accurate to avoid delays:

Notify the IRS of any name changes due to marriage or divorce.
Verify that your address is current with the IRS and financial institutions.

5. Review Your Tax Professional’s Checklist

If you’re working with a CPA like Brad Barnes, CPA, request their year-end checklist or organizer to ensure you have everything ready. Providing complete and accurate information upfront helps your CPA maximize your deductions and credits.

6. Plan for Next Year

Tax preparation doesn’t end with filing—it’s an ongoing process. Use December to evaluate your financial habits and set goals for the upcoming year:

Set Up a Tax Folder: Create a system to save receipts, statements, and records throughout the year.
Automate Contributions: Schedule regular deposits into tax-advantaged accounts.
Review Your Budget: Plan for estimated taxes if you’re self-employed or have additional income streams.

7. Stay on Top of Deadlines

Don’t let important deadlines sneak up on you:

December 31: Deadline for charitable contributions, retirement contributions, and most income/expense adjustments.
January 15: Fourth-quarter estimated tax payment due (if applicable).
April 15: Filing deadline for most taxpayers.

Start the New Year with Confidence

Taking time in December to organize, review, and plan for tax season will set you up for success. Whether you’re filing on your own or working with a trusted CPA like Brad, being prepared ensures a smoother process and better outcomes.

Need help navigating your taxes? Contact Brad Barnes, CPA, today to take the stress out of tax season and ensure you get the maximum return.

Becky Albertson