As we approach the last day of tax season, you likely fall into one of two categories: the person sitting back and enjoying their tax return (maybe you’ve already had yours for months) or you’re scrambling to make sure you can pay your taxes this year. No matter which camp you fall into, consider the following to help you better prepare for next year’s tax season.
Any time you buy something, save your receipts. Not only will this help in the event you need to return something but it’s also really helpful to have all your purchases in front of you at tax time. There are many everyday purchases that can be deducted from the total amount you owe. While this likely won’t take your tax bill down to zero, it can help you save some money.
This tip becomes increasingly important if you are a 1099 contractor or own a small business. If you purchase anything for your business, you should save the receipts. There are many more write-offs available in these situations so keep that in mind when you’re purchasing.
Pay When You Need to Pay
Depending on your financial situation, you may need to pay your taxes during different parts of the year. With more people starting a side hustle than ever before, more people are falling into the “small business” category and may not be aware that they actually need to pay taxes quarterly. If you get to the end of the year without paying your taxes when you should have been paying them quarterly, you could face a penalty that will raise your tax bill up even higher than it was before!
If you have recently started a side hustle or another small business, make sure that you are still within tax guidelines and that you’re paying them when you’re supposed to.
Start Saving as Much Money as Possible
Did you know that one of the easiest ways to learn how to prepare for next year’s taxes is as simple as saving more money? (Keyword here: simple, not easy).
Many employers offer plans that allow you to save money on your taxes by putting money into savings pre-tax. This lowers the amount of your income and will lead to a lower tax bill overall. Talk with your benefits coordinator to learn more about the options that are available to you and save as much as you’re able to!
Another option for saving money on your taxes is to take advantage of your employer’s FSA or HSA. These spending accounts are also pre-tax and will lower the amount of income you have to be taxed — plus they’re great for routine and emergency medical expenses!
Want an easy way to track your savings? Grab my printable savings tracker to help you stay on track.
Track All Your Sources of Income Independently
At the beginning of the new year, your employer will send out your W-2s, and if you’re a contractor, you’ll get everything you need to file your taxes based on the income you made while contracting. For people who have several jobs or clients, this can be confusing. If you think you have all of the papers you need to file and it turns out that you don’t, you could face penalties from the IRS for not filing accurate information. Because of this, keep a running spreadsheet of all income that you have over the course of the year.
Check Your State
Many states require you to pay income taxes. There are some exceptions — Washington, South Dakota, Alaska, Florida, Nevada, Texas, Wyoming, New Hampshire, and Tennessee — but you still may need to pay taxes to your county or municipality. Check with your state to make sure that you have all the information that you need to file your taxes.
Make Note of Any Changes
There are some things that will change the amount that you have to pay in taxes. Obviously, you’re going to remember big things like having a baby or purchasing a house, but did you know that even small changes like moving to a different county, switching jobs, or even buying certain new cars could impact your taxes? Any time that changes happen in your life, make a note of it so that you’ll remember it at tax time!
Prepare for Next Year’s Taxes
Taxes become less of a chore once you learn how to prepare for next year’s taxes. Part of that reduction in stress comes when you are prepared – knowing where your money went and why. If you want to take control of your money over this next year, there’s no better place to start than with my Quick Start Budgeting Workbook! Grab yours today!