Preparing for Tax Season

12/06/2022 Written by: Jenny Boudreau

One of the best things you can do to prepare for tax season is to plan well in advance. While you can make changes throughout the year, there are several good reasons to get started early:

  • Your job, relationship, or housing changed.
  • You may owe taxes.
  • You want to ensure you qualify for tax deductions.

Throughout the year, keep detailed financial records. Having this information at your fingertips can help you avoid delays or stress as the filing deadline approaches. During the first few months of the new year, ensure you receive all W-2 and 1099 forms and other tax documents. Give yourself adequate time to gather the documents needed to prepare and file your taxes by the April 15 deadline.

Here’s a list of items to collect, depending on your situation:

  • Prior year tax returns
  • Pay stubs
  • Mortgage payment records
  • Closing paperwork on home purchases
  • Receipts for items or services that may be claimed as itemized deductions
  • Records from charitable donations
  • Mileage logs from vehicles used for business
  • Business travel receipts
  • Credit card and bank statements to verify deductions
  • Medical bills
  • 1099-G forms for state and local taxes
  • 1099 forms for dividend or other income

Benjamin Franklin is often credited for the phrase, “…nothing can be said to be certain, except death and taxes.” So, while we’re nearing the end of 2022, consider the following ideas for future tax seasons.

  • Contribute as much as you're able to your retirement and/or health savings account. In addition to helping you prepare for your future financial needs, these contributions may lower your taxable income.
  • If you are investing in the financial markets, you may be able to claim deductions if you experienced losses.
  • Make charitable donations to qualified organizations. Not only can you support a deserving non-profit, but your gift may qualify as a tax deduction.
  • Review prior year returns to determine whether you need to adjust your withholding.
  • Consider how other taxes, such as local and state requirements, may affect your situation.

A sound record-keeping system can help with organization and alleviate concerns as the filing deadline approaches. If you keep documents on your computer, back them up on an external hard drive or another system. The IRS recommends the following timelines for retaining financial records.

  • Keep your tax records for three years, with these exceptions:
    • Keep your records for six years if you failed to report income you should have, and the income was more than 25% of the gross income listed on your return.
    • Keep records indefinitely if you do not file a return.
  • If you claimed a credit or refund after you filed your return, keep your records for three years from the original filing date or two years from the date you paid your taxes, whichever is later.
  • Keep your records for seven years if you claimed a loss from worthless securities or a bad debt deduction.
  • Keep employment tax records for at least four years after the due date on the taxes or after you paid the taxes, whichever is later.

For many people, taxes can be confusing. Discussing your situation with a financial and tax professional can help you understand how taxes work and how to put the tax code to work for you.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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