The tax season can be stressful, particularly for those whose documentation isn’t in one place, or for those who are between jobs, with inconsistent income. Filing taxes the right way is important to avoid penalties for misreporting or not reporting at all. Therefore, getting prepared in advance will help you learn how to do it when to do it, and everything in between. This guide will provide practical and effective tips for handling your taxes correctly.
Organize Your Tax Documents
The tax season begins with gathering your tax documents and creating either an online or a physical file. Some of these documents include:
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- 1099 forms for freelance or independent contract workers
- Investment income statements
- Deductible tax receipts
- W-2 forms
As you do this, use your Identity Protection Pin (IP PP) to prevent identity theft. Also, you should know when these documents are available so you can start the process early. The 1099 forms are available by January 31 and the W-2 forms issued by employers to employees should be available no later than January 31.
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Check Previous Year’s Return
It’s important to review your previous year’s tax returns to know what to expect. If your income is the same, and still have similar deductions, you know how much you ought to remit to the Internal Revenue Service (IRS).
If things have changed, you can calculate the difference, and track the payments. In case you have overpaid, underpaid, or have penalties, you can work on clearing these issues.
Life Milestones and Impact on Tax
Between the last tax season and this year, you might have married, divorced, changed jobs, lost employment, sold your business, shut down, acquired more property and so forth. It’s important to understand how these changes impact your taxes.
Suppose you were filing taxes jointly with your former spouse, you need to know how to figure out how to file individually. Newlyweds should also find out how to do this jointly.
When it comes to property division, the tax man should know everything about asset division, and changes going forward.
If you had a new baby, you might qualify for tax credits so look them up. In case of a higher salary, your tax bracket will change so keep tabs on this.
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Capitalize on Tax Deductions
For some reason, paying taxes makes you feel the pinch which is why you should take advantage of programs that waive your tax obligations. For example, by contributing to the traditional IRS by April 15, 2025, you can lower your taxable income. For self-employed individuals, consider contributing to SEP IRS. You can do so until its deadline on April 15.
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Follow Up on Tax Changes
Taxable income rarely remains the same from one financial year to the next. As a result, check on any changes, for example, those that account for inflation on federal tax and the standardized deductions.
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Look Out for Tax Refunds or Tax Due
If you notice that the IRS owes you money for overpayment, check on how you can recoup your cash and how you’ll use it. If you owe the IRS, plan on a repayment schedule to avoid accumulating interest or plan with them on a repayment plan.
Take Your Time
You might be tempted to rush in and file your returns so you can get over it. However, don’t. Utilize this time to learn more about the process, check that your figures are accurate, and spare adequate time to file, to avoid glossing over key issues.
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Consult a Professional
You file your taxes annually but it seems like year on year, the process never gets easy. It’s for this reason that tax professionals exit. Find a firm or a person who can handle your issues adequately, to guide you through the process.
Conclusion
Tax season doesn’t have to be a daunting experience. With proper planning and organization, you can ensure a smooth filing process for 2025. Start early by gathering your documents, tracking deductions, and staying informed on any changes to tax laws. Use the right tools, whether it’s tax preparation software or the help of a professional, to guide you through the process. By taking the right steps, you’ll not only ensure compliance but also maximize your refund or reduce your tax liability. Take the stress out of tax season and stay on top of your finances year-round.
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