5 Things to Do Now to Prepare for the 2022 Tax Season
If you’re like most people, your mind is probably focused on the upcoming holidays—not on tax season. The majority of Americans don’t begin to worry about preparing to file their tax return until after the New Year. But beginning to prepare now can make filing much faster and easier for you when tax season does finally roll around; you may even be able to reduce your tax liability! Here are five things you should be doing right now to start preparing for the 2022 tax season.
Review Your Withholdings
The last couple of years have shaken up a lot of people’s finances. Between financial relief checks, advanced payments on the child tax credit, and personal financial changes, your 2021 tax return could look very different from ones you’ve filed previously. It’s a good idea to review your paycheck withholdings new to ensure you’re having the right amount pulled from your check for taxes each month.
You can do this using the IRS’s withholding calculator. This tool helps you to calculate the number of exemptions you should be claiming on your paycheck. Then, you can request a new W-4 from your employer to update your exemptions. It only takes a couple of minutes, and it can save you from an unwelcome surprise on your taxes when you file.
Start a Documents Folder
One of the most time-consuming and frustrating parts of filing your tax return involves collecting all of the necessary documents to complete it. Obviously, you won’t have a lot of the official tax forms that you need until closer to the tax deadline. However, there are many other documents that you should have on hand for filing your return that aren’t official IRS forms. This can include expense receipts, receipts and/or details of charitable contributions, mortgage interest statements, and other important financial documents.
Create a tax documents folder—either physical or digital—now and begin compiling everything you’ll need for tax season. Collect those receipts and statements you already have, then add the official forms to the folder as you receive them during tax season. Once you have the last necessary form, all of your documents will already be organized and ready for you and your tax preparer.
Make Contributions to Retirement Accounts
One of the benefits of planning for tax season now is that you can look ahead and make last-minute tax moves to reduce your tax liability. One of those moves that people often make near the end of the tax year is contributing to retirement accounts, including 401k plans, Roth IRAs, and traditional IRAs. Of course, it’s always a good idea to contribute as much as you can to retirement; however, if you can’t max out your retirement plans, preparing for your tax return now can at least allow you to see how your contributions will impact your tax bill when you file.
Additionally, making one large, lump-sum contribution to each of your retirement accounts isn’t always an option for everyone. For some, it can be difficult to pull together that much money in time for it to impact your final tax bill. By preparing now, you’ll actually be giving yourself several months to make those retirement account contributions. For your 401k plan, you’ll have about a month and a half to get funds into your account; but for both types of IRAs, you’ll have several months to get funds together, as the contribution deadline for a 2021 tax deduction is actually April 15th.
Review Your Qualifying Deductions
If you begin preparing for your tax return now, you can take a little extra time to review common tax deductions, credits, and exemptions, making it less likely that you’ll miss any major tax savings when you file. This is important to do even if you’re working with a CPA; your tax preparer doesn’t know all of the details of your personal situation, and they may not know you qualify for a specific deduction without the right information. Educating yourself a little bit on deductions and credits helps you to ensure your CPA has the necessary information to claim every eligible credit and deduction for you.
Schedule a Tax Planning Meeting
Finally, be sure to use this extra time to sit down with a CPA and do a bit of tax planning prior to filing your return. Most tax preparers’ schedules fill up rapidly once tax season starts, so scheduling your meeting now can ensure that you get the time you need to review your finances and go over any last-minute steps you should take to reduce your 2021 tax liability.
Contact us today to schedule a meeting with one of our tax experts.