To get ready for tax season, determine your filing status, collect all necessary tax documents, decide whether to file independently or hire a tax professional, maximize your retirement contributions, and adjust your tax withholding to ensure accurate payments throughout the year.

Key Takeaways

1. Understanding your filing status is crucial, as it determines your tax rates, standard deduction amount, and eligibility for specific credits and deductions.

2. Gather all your tax documents - Having all your forms like W-2s, 1099s, and 1098s in one place makes filing easier.

3. Decide whether to file your taxes yourself or hire a tax preparer. Filing on your own can save money, but it may be more complex, while a preparer offers professional expertise and guidance.

4. Maximize your retirement contributions—contributions to IRAs can be made up until the tax deadline, helping to reduce your taxable income.

5. Adjust your withholding by using the IRS estimator to ensure the correct amount is being withheld from your paycheck based on your financial situation.

1. Understanding Your Filing Status

The IRS recognizes five primary filing statuses that apply to all taxpayers:

1. Single
2. Married Filing Jointly
3. Married Filing Separately
4. Head of Household
5. Qualifying Widow/Widower with Dependent Children

Your filing status affects your tax filing requirements and determines your eligibility for specific deductions and credits. If you’re unsure about your filing status, the IRS offers a helpful tool to guide you. By answering a series of questions, the tool will determine the filing status that best fits your situation.

2. Make Sure Your Name and Address Is Updated

It may seem obvious, but it’s easy to overlook. If you’ve recently moved, married, divorced, or changed your name, make sure to update this information with both the IRS and the Social Security Administration.

If you’ve legally changed your name, contact your local Social Security office to update your records. You’ll need to provide proof of identity, such as a government-issued ID, marriage license, or life insurance policy. To update your address with the IRS, you can call them directly, complete and mail a change-of-address form, or provide your new address when filing your return. However, if you wait to update your address until filing, you might miss important IRS communications in the meantime.

3. Organize Your Tax Documents

Once you determine your filing status, collect all the necessary documents for filing your tax return. Here are some common ones:

1. A copy of last year’s tax return: This serves as a helpful reference to understand the deductions and credits you claimed previously and can remind you of any details needed for your tax return.
2. W-2 Forms: A W-2 outlines the income you earned from your job during the most recent tax year. If you were employed full-time or part-time, your employer is generally required to send this form to you by the end of January.
3. 1099 Forms: If you were self-employed, your clients will provide individual 1099 forms showing how much they paid you. If you didn’t pay quarterly estimated taxes on your self-employment income during the year, you’ll need to settle this when you file your return in April.
4. Form 1098: If you’re a homeowner, this form details the amount of mortgage interest you paid during the year, which may be deductible on your tax return.
5. Form 1099-DIV: This form reports any income you’ve received from dividends or distributions related to your investments. If you own stocks, bonds, rental property, or other profit-generating investments, you should expect to receive this form.
6. Form 1098-E: This student loan interest statement provides details about the amount of student loan interest you paid during the year, which may be deductible on your tax return.
7. Form 5498: This form provides a record of the contributions you’ve made to an individual retirement account (IRA) throughout the year. The bank or brokerage managing your account will send this form either at the end of the tax year or in the following January. Contributions may be tax-deductible if your income is within the IRS’s established limits.
8. Form 1095-A: This Health Insurance Marketplace statement provides information for individuals who enrolled in a qualified health plan through the Marketplace. It helps determine eligibility for the premium tax credit to offset healthcare costs or reconcile the credit with any advance payments received during the year.
9. Letter 6419: This letter outlines the total amount of advance child tax credits you received, allowing you to accurately claim any remaining credit on your tax return. This credit is available only if you have a child or dependent under the age of 17.
10. Information on Business Expenses: If you’re self-employed or own a small business, it’s essential to track your expenses accurately. Keep receipts and credit card statements to document your spending. If you use bookkeeping software linked to your accounts, you can easily export the data for your tax return. Alternatively, download your monthly business credit card statements or maintain a spreadsheet listing all your annual expenses. Keeping detailed records throughout the year helps maximize business deductions and potentially reduce your tax liability.
    
    While this list isn’t exhaustive, it provides a solid starting point to get organized for tax season. It can also help you determine whether you’re comfortable filing your own taxes or if it’s better to work with a tax professional.
    
    

4. Decide If You Will DIY or Use A Tax Preparer

As you prepare for tax season, you’ll also need to decide whether to file your taxes yourself or seek assistance from an accounting professional or tax preparer.

The more complex your tax situation, the more beneficial it may be to have an experienced tax professional handle your return. For example, if you own a business and need to file both personal and business tax returns, an accountant can help ensure all information is accurate and properly filed with the IRS.

However, if your tax situation is relatively simple—for instance, if you’re a single filer with a W-2 job, no homeownership, and no dependents—it might be more cost-effective and convenient to use tax filing software. Many of these programs are user-friendly and guide everyday filers through the process. Additionally, some offer the option to pay a small fee for a tax preparer affiliated with the company to review your return before submission.

5. Max Out Your IRA Contributions

If you have an IRA, it’s a good idea to contribute as much as you can before the filing deadline in April. Doing so not only boosts your retirement savings but may also reduce your taxable income if the contributions are deductible.

For the 2024/2025 tax year, the IRS allows individuals under 50 to contribute up to $7,000 to an IRA. Those aged 50 and older can contribute up to $8,000, which includes a $1,000 catch-up contribution to help boost retirement savings.

6. Consider Filing For An Extension

Tax season can be hectic, and it’s not uncommon to find yourself in February or even March still waiting for essential tax documents that may have been delayed, lost in the mail, or not sent at all.

To give yourself extra time, consider filing an extension to request an automatic six-month delay, allowing you to file your tax return in October. To do this, complete IRS Form 4868 or ask your tax preparer to handle it for you. Requesting an extension is free, but keep in mind that if you owe taxes, interest will accrue, and penalties may apply if payment isn’t made by the original filing deadline.

Even if you’re confident you won’t owe any taxes, filing an extension can give you the extra time needed to gather all necessary documents, carefully prepare your return, ensure accuracy, and avoid penalties for failing to file on time.

7. Adjust Your Withholding

Lastly, it’s a good idea to review your W-4 withholding. If you work a traditional W-2 job, your employer will ask you to complete a W-4 form, typically each January. This form determines how much tax to withhold from your paycheck based on your tax status, the number of dependents you claim, and any additional adjustments for nonemployment income or deductions.

If you received a large refund after filing last year but your tax situation hasn’t changed much, it might mean you’re withholding too much from your paycheck. Conversely, if you owed taxes, it could indicate you’re not withholding enough. Adjusting your W-4 can help ensure the correct amount is withheld.

If you’re unsure about your withholding, the IRS provides a tax withholding estimator to help determine the appropriate amount. Once you’ve identified the correct withholding level, consider contacting your HR department to update your W-4. This adjustment can help prevent similar issues when filing your next return.