For a lot of people, tax season brings a mix of confusion, stress, and last-minute scrambling. Fortunately, getting ready doesn’t have to be overwhelming. A little prep now can make filing easier and help you avoid any unwanted surprises.
Below, we’ll walk through a few simple steps you can take before you file. Have questions as you go along? Reach out to one of our Red Rockers so they can help!
Tip #1: Gather Your Important Documents Early
One of the easiest ways to lower tax-time stress is to start collecting your documents as soon as they’re available. Here are some common documents you might need:
- W-2s from employers
- 1099s for freelance income, interest, or dividends
- Mortgage interest statements (1098)
- Student loan interest statements
- Charitable donation receipts
- Childcare and education expenses
- Investment or retirement account statements
Most tax forms typically arrive between late January and early February, either by mail or electronically. To stay organized, create one designated folder (digital or physical) to put all tax-related documents in as they arrive.
You can also use your online banking access to easily pull interest statements or account summaries, which can help streamline the process when it’s time to file.
Tip #2: Review Your Withholding or Estimated Payments
Withholding simply refers to the amount of taxes taken out of each paycheck and sent to the IRS throughout the year. If too little is withheld, you may owe money at tax time. If too much is withheld, you might receive a larger refund—but that also means you had less money in your paycheck during the year.
A quick review of your recent pay stubs can give you a sense of how much is being withheld. You can also use the IRS withholding calculator to see whether your current setup still makes sense for your situation.
Life changes often impact your taxes as well. Getting married, having a child, changing jobs, receiving a raise, or adding side income can all impact how much you should withhold. Making adjustments early in the year can help prevent surprises and keep your cash flow more predictable.
If you’re self-employed or have additional income, remember to review estimated tax payments to stay on track and avoid penalties.
Tip #3: Get Organized With Deductions and Tax Credits
Deductions and tax credits can help reduce how much you owe (or increase your refund!), but only if you’re organized and know what applies to you.
A quick refresher:
- Deductions lower the amount of your income that gets taxed.
- Tax credits reduce the amount of tax you owe, dollar for dollar.
Some people take the standard deduction, while others benefit from itemizing based on their eligible expenses. Some common deductions include:
- Mortgage interest
- Student loan interest
- Medical expenses
- Charitable contributions
And some common tax credits might include:
- Child Tax Credit
- Earned Income Tax Credit
- Education credits
- Childcare credits
- Energy efficiency credits
Keeping digital copies or photos of receipts throughout the year can make filing much easier. A simple folder on your phone or computer can go a long way when tax time arrives.
Tip #4: Understand Key Deadlines and Filing Options
Knowing a few key tax deadlines ahead of time can help you avoid any late fees.
For most of us, the federal tax filing deadline is typically April 15. If you need more time to file, you can request an extension, but it’s important to note that an extension gives you more time to submit your paperwork, not more time to pay any taxes owed.
If you make estimated tax payments, those deadlines usually occur quarterly throughout the year, so be sure to mark them on your calendar in advance.
When it comes to filing, you have a few options. Many people use reputable online tax software for straightforward returns. If your situation is more complex, such as owning a business, having investment income, or navigating major life changes, working with a tax professional might give you some extra peace of mind. You can also explore free tax preparation programs available through community organizations and IRS-supported services, which can be a great option if you qualify.
Filing early can speed up your refund, while waiting closer to the deadline gives you more time to gather your documents. Choosing the approach that fits your lifestyle can make the process smoother.
Tip #5: Use Tax Season to Plan for the Year Ahead
Yes, most people can’t wait to file and be done with it, but this season is also a fantastic opportunity to step back and look at your bigger financial picture.
This is also a smart time to think about how your savings are working for you. If you have money set aside that you don’t need immediate access to, a certificate of deposit (CD) can be a way to earn a guaranteed rate over a fixed period of time, helping your savings grow without market risk. CDs can be especially helpful for planned expenses or future purchases.
A Little Planning Now Goes a Long Way
Getting ready for tax season doesn’t have to be a big, stressful project. A little prep can make the whole process feel a lot more manageable.
And if you ever want a second opinion or help mapping out your next step, Red Rocks Credit Union is always here to help. We’re happy to talk through your options and help you make choices that feel right for you.
Because when you feel prepared, even tax season gets a little easier!