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Written by: Patrick Marcinko, CFP® | Bogart Wealth
Let’s face it, most people don’t enjoy filing their taxes. To avoid procrastinating until the last minute, taking small steps now can make the filing process easier this Spring. While Tax Day may seem far off, it’ll be here before you know it. If you want to make tax season smoother this year, here are some tips to get you prepared and ready to go.
1. Pull together the information on all your income (not just your salary)
Start your tax season by reviewing all your income sources for 2024. Often, this will go beyond just your salary. You may have income from interest, dividends, real estate investments, stock options – there are many sources of income you may have to report.
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For Employees: Your W-2 will show how much you earned and how much was withheld in taxes. Employers send these out by the end of January, so keep an eye out.
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For Independent Contractors: You’ll likely receive 1099 forms. These will report the income you earned from working as a contractor.
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Other Sources of Income: Don't forget about rental income, interest, dividends, retirement distributions, and capital gains. Make sure to gather the right forms, like 1099-INT, 1099-DIV, 1099-R, and 1099-B. Consult with your tax professional if you are unsure which forms will apply to you.
2. Documents to be on the lookout for
Your tax return will pull information from all income sources, so you’ll want to gather the necessary documents. The more organized you are, the easier it will be during tax time.
Here are the documents to gather:
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W-2 (for employees)
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1099s (for contractors and investment income)
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Mortgage interest (Form 1098)
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Receipts for donations, medical expenses, and work-related costs
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Retirement contributions (IRAs, 401(k)s)
3. Are you eligible for any deductions and/or credits?
Tax deductions and credits have the potential to reduce your tax bill. Here are some examples of items that may reduce your tax bill:
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Standard vs. Itemized Deductions: The standard deduction will be the election for most, but sometimes itemizing your deductions can save you more. Common deductions include:
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Mortgage interest
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State and local taxes (SALT)
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Medical expenses (above 7.5% of your AGI)
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Charitable contributions
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Tax Credits: Unlike deductions, tax credits reduce your tax bill directly. Some key credits include:
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Child Tax Credit: Up to $2,000 per child under 17
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Education Credits: The American Opportunity Tax Credit and Lifetime Learning Credit help offset education expenses.
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4. Important dates for tax filing and payments
If you’re not quite ready by April 15th, you can file for an extension. This gives you an extra six months to submit your paperwork. However, keep in mind that the extension is for filing only—not for paying your taxes. Any owed taxes are still due by April 15th to avoid penalties.
5. Information to keep after you file your taxes
Once you’ve filed your taxes, make sure to keep a copy of your return and all supporting documents for at least three years. If you’ve underreported your income or are claiming losses, the IRS recommends keeping records for up to seven years.
Conclusion
Preparing for tax season doesn't have to be a stressful task. By reviewing your income, gathering the necessary documents, considering deductions and credits, and filing early, you'll set yourself up for a smooth process. Whether you’re filing on your own or working with a professional, taking action now will make all the difference.
Happy Tax Season!
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