Whew, you did it; you survived another tax season! Don’t rest on your laurels too long, though, another tax year is already in motion. Follow these steps now to make April 2020 your best tax season yet.
- Review your withholdings. Whether you received a refund or paid Uncle Sam, the beginning of each tax year is a good time to review your withholdings. Use this time to adjust your regular paychecks to balance out your year-end settlement. You can opt to have fewer taxes withheld from your paycheck, in exchange for a smaller refund, or vice versa.
- Check your finances monthly. Avoid the stress of tax time by making (and keeping!) an appointment with yourself each month to check in on your financial situation. This check in will provide insight into your finances throughout the year and eliminate surprises at tax time. Be sure to include your spouse in the conversation, if applicable.
This step is critical for entrepreneurs. Keeping track of your income and expenses on a monthly bases through apps like Wave or Quickbooks will make your life much easier next spring.
- Consider your future. It’s never too early to plan for retirement. If you’re not saving yet, start now. It’s especially advantageous if your employer offers a 401k because it allows you to contribute pre-tax money and lowers your taxable income. If your company offers a 401k match up, take advantage of it! It’s essentially free money; do not leave it on the table.
- Give back. If you find that charitable giving is something you’re overlooking each year, plan for it now. Be sure to select a charity that reflects your values and has a mission you believe in. Not only will you feel good about giving back, your charitable donations are tax deductible – especially helpful for entrepreneurs donating on behalf of their businesses.
- Check in with the pros. As you monitor throughout the year, you may notice a change in your financial status or have other questions. Touch base with your tax accountant, financial advisor or other tax professional for guidance. Solicit their help where you need it to avoid unpleasant surprises at tax time.
If you’re self-employed, many tax professionals recommend that you reconcile and pay your taxes quarterly to avoid large lump-sum payments due at one time.
April 2020 will be here before you know it. Make it easy on your future self and start preparing for your tax time now.