Filing taxes doesn’t have to be a stressful ordeal. Following some simple steps throughout the year can make the process much smoother. Here are some friendly tax tips to help you out:
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Organize Your Tax Records
Keeping your tax records organized is essential. Create a system where you store all important documents together. You can use tax software for electronic records or keep paper documents in clearly labeled folders. As you receive new tax records, add them to your files immediately. This way, when tax season arrives, you’ll have everything you need in one place. Plus, organized records can help you identify deductions or credits you might otherwise overlook.
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Check Your Withholding
Federal taxes are paid as you earn income, so it’s essential to ensure you’re withholding enough from your paychecks to cover your tax liability. Use the IRS Withholding Estimator to check if you’re on track. If you need to adjust your withholding, submit an updated Form W-4 to your employer. This step is particularly crucial if you experience any changes in your personal or financial situation.
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Know Your Filing Status
Your filing status determines your filing requirements, standard deduction, eligibility for certain credits, and the correct tax amount. If you’re unsure which status to choose, the IRS’s Interactive Tax Assistant can help. Significant life changes like marriage, divorce, a new baby, or a death in the family can affect your filing status and eligibility for tax benefits, so it’s important to stay informed.
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Understand Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is your total income from all sources minus any adjustments. It’s crucial because it impacts your tax rate and the amount of tax you owe. Generally, the higher your AGI, the higher your tax rate. Throughout the year, consider making changes that could lower your AGI and reduce your tax burden.
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Update Your Address and Name
If you move, notify the United States Postal Service, your employers, and the IRS of your new address. To officially change your mailing address with the IRS, complete Form 8822 and mail it to the appropriate address for your area. For a name change, report it to the Social Security Administration. Keeping your information up-to-date helps ensure a smooth filing process.
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Save for Retirement
Contributing to a retirement plan can also lower your AGI. Contributions to a workplace retirement plan or a traditional IRA can reduce your taxable income, offering tax benefits now while you save for the future.
By staying organized and making informed decisions throughout the year, you can make tax time much less stressful! With these tips, you’ll be better prepared and might even find yourself looking forward to a smoother, more manageable tax season. If you need help preparing for tax season, contact an Abacus Tax Professional at 417.823.7171 or at info@abacuspro.com. You can learn more about our tax services here.
