The Year-Round Tax Planning Checklist

If you filed taxes on time this year, congratulations! You may be breathing a sigh of relief and planning to avoid thinking about the IRS until this time next year. But if you take some time to review your recent tax filing and plan for taxes throughout the year, you may be able to save money in the long run while avoiding any potential headaches come tax season.

Planning throughout the year for tax filing may allow you to save time and stress and make it easier to file an accurate return. If the IRS typically owes you money each year, an accurate return will result in a faster refund.

Consider following these tips to help you be prepared for efficient tax filing next year.

If your refund or tax bill was not what you expected this year, either too much or too little, you may need to adjust the amount your employer is withholding from your paychecks to properly cover income taxes.

The IRS offers a tax withholding estimator that you can use to determine the right amount for your situation. To change the amount your employer withholds, you’ll need to provide them with an updated Form W-4.

Remember to adjust your withholding anytime your tax or income changes throughout the year to ensure that you won’t be surprised when you file your taxes.

If you have taxable income from a side gig, investments, or other sources that do not provide tax withholding, you may need to make estimated tax payments on a quarterly basis throughout the year.

Typically, if you owe taxes of $1,000 or more when your return is filed, the IRS expects you to make estimated tax payments. You’ll need to estimate your income for the year to determine how much to pay in estimated taxes.

It’s a good idea to consult with a tax professional for help. You can also use the worksheet in Form 1040-ES to help. If you estimate incorrectly, you always can adjust your tax payments later in the year.

When you file taxes, gathering the necessary documents can be one of the most time-consuming tasks.

You can avoid that process at tax time by keeping your records organized all year. Consider creating four folders and filing documents in them throughout the year, including:

• Personal information. This includes Social Security numbers for everyone on your tax return, unexpired identification, your adjusted gross income and exact refund amount from last year, and if applicable, your PIN for e-filing your tax return.
• IRS forms. This folder will include tax forms from people who paid you money, such as your W-2 from your employer; 1099 forms for side gig work, miscellaneous income, or earned interest. In most cases, these forms will be sent to you in January or February following the tax year. They may also be submitted electronically, so be sure to check your records or e-mail for any you may have missed.
• Documentation for credits or deductions. If you plan to itemize deductions, you’ll need to keep track of necessary records. For example, if you’re purchasing an energy-efficient heat pump and want to take the home energy tax credit, keep your receipt. You may also need to keep charitable donation receipts, home mortgage and property tax statements, childcare expenses, business mileage logs, 1098-T for college tuition payments, or other necessary records.
• Documents from side gigs or self-employment. If you own a business or have a side gig, this folder will contain records of your estimated tax payments, records of deductible office expenses, statements from banks or payment processors, and other documentation.

If you relocate, get married or divorced, have or adopt a child, get a second job, retire, experience a natural disaster, or experience other major life changes, your taxes may be affected.

Rather than waiting until tax season to figure it out, take the appropriate steps when your situation changes. The IRS offers a list of forms that should be completed when certain life events occur to help you stay on top of the changes.

When you take time throughout the year to review your tax situation, you’ll be better prepared for the following tax season and may even allow you to save more money in the long run.

Disclaimer: This article is for general information and education only. It should not be considered financial or tax advice.