Dollars and Sense

Tax season is coming. Make these 4 moves to prepare

Filing your taxes doesn’t have to feel overwhelming. Use these tips to get organized early, so you can be finished early.

 

This article originally appeared in The Motley Fool.
It is licensed by Upwise.

Last year, the IRS postponed the start of the tax-filing season due to the pandemic. This year, the agency plans to start on schedule and will begin accepting tax returns as early as Jan. 24. That gives you an opportunity to get your taxes in early and avoid waiting months for the refund you think you're due. 

But even if you aren't planning to submit your taxes until this year's April 18 deadline, it still pays to prepare for tax season ahead of time. This especially holds true if your tax situation is complicated—if you own a business or live in one state but work in another. Here are a few moves you can make to get ready and avoid stress in the course of filing your taxes. 

1. Find a good accountant

If your taxes are simple, you can probably file them solo. But if you think you'll need help tackling this-year's return, now's the time to seek out an accountant. The closer you get to the tax-filing deadline, the harder it will be to find a tax professional—or an affordable one. 

Accounting professionals may be less available due to illness or backlogs, so the sooner you're able to secure the help you need, the better. 

2. Start gathering your paperwork 

Some of the tax paperwork you need may be on its way, such as the W-2 your employer needs to provide you with. But if you have documents or receipts you know you'll need to file your taxes, start digging them up and organizing them now. Doing so could save you a world of hassle later on. 

Imagine, for example, that you have a receipt for business equipment that's so faded you can't read it. If you discover that now, you'll have plenty of time to contact the merchant and ask for a better record of your purchase. Wait to make that call, and you may end up scrambling. 

3. Max out your 2021 IRA if you didn't do so last year 

The more money you put into a traditional IRA, the more income you can shield from the IRS. Last year, IRAs maxed out at $6,000 for savers under age 50 and $7,000 for those 50 and over. If you didn't hit that limit, you have until this year's tax-filing deadline to finish contributing to your IRA. It especially pays to do so if you're worried you'll wind up owing the IRS money. 

4. Max out your 2021 HSA 

It's not too late to sneak money into last year's HSA (health savings account). In 2021, HSAs maxed out at $3,600 for savers with self-only coverage and $7,200 with family-level coverage. Savers 55 and older were also entitled to a $1,000 catch-up contribution. 

Like IRAs, HSA contributions can lower your tax burden. If you're concerned about a whopping tax bill, then it definitely makes sense to try to sneak more money into your HSA while you can.

Put in the effort now 

While you may think it's too soon to start worrying about taxes, the reality is that the sooner you prepare, the easier the process of submitting your return will be. Make these moves in the coming weeks—you’ll be thankful for them once tax season really kicks into high gear. 

 


This article was written by Maurie Backman from The Motley Fool and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

 

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