The new year often spurs a multitude of resolutions and targets for people. With respect to taxes, it is often advised that major decisions and actions should have been finalized by the start of the year. Nevertheless, it is harder to accomplish in practice for many. The hustle and bustle of November and December, characterized by holiday preparations and festivities, overshadow thoughts of wrapping up tax matters for the year.
Despite the lapse of some key deadlines, you still have a window of opportunity to make beneficial tax moves before filing your tax return, as official deadlines for the task are a few months away. Here are five actions you can take to streamline your tax operations.
1. PREPARE AND GET ORGANIZED
It may feel like there’s ample time left until tax season, but these months can pass by quickly. It’s crucial not to get to April first unprepared and scrambling to sort out your taxes. Instead, seize the moment to sort out everything now. Compile all the necessary documents – from business costs to charity receipts and account statements – from the past year. This early organization allows you to file your tax return conveniently and speedily.
2. FUND YOUR IRA
Even though you should have made the maximum contributions to your 401(k) and other savings accounts by now, you can still aid your tax situation by contributing to your IRA up to April 15th. This will enable you to grow your savings, budget for critical expenses, and earn a generous tax deduction.
3. SETTLE YOUR QUARTERLY TAXES
If you have non-taxed income – perhaps you’re self-employed or have supplementary freelance work or side jobs – it’s time to estimate and pay your quarterly taxes for that income earned between September and December. Remember that this isn’t a one-off; quarterly tax payments for non-taxed income are a recurring obligation.
4. FILE EARLY
Why postpone and stress over last-minute tax filing? If you are prepared, start processing your tax returns from January 23rd. If your income is less than $64,000, you can avail of the free filing option, regardless of your filing status. You can even begin this process earlier, January 13th, thus avoiding the last-minute frenzy which can often lead to inevitable errors.
5. STRATEGIZE FOR THE FUTURE
Although one tax season per year already seems overwhelming, it’s advisable to plan ahead since some tax decisions have specific time constraints and deadlines that need attention all year round. A valuable strategy includes examining your withholding allowances. If you found yourself owing taxes in 2016, consider increasing your withholdings for 2017 to avoid making payments at the end of the tax year.
Also, if intricately sifting through piles of documents is not your forte, now is the perfect time to create a systematic file for saving all tax-related documents throughout the year. Staying informed about the changes in tax laws and exploring ways to leverage new deductions can significantly benefit your tax operations, given you do so before the year rapidly passes by.
Even though taxes are a constant, their weight tends to be felt more at the brink of the new year. The usual pandemonium of life and work can make it easy to forget these responsibilities until the deadline is nearly upon us. However, you can still take several prudent actions to enhance your financial situation.
Aside from these benefits, you can take this time as an opportunity to reevaluate tax-related steps and plan ahead for the forthcoming year. So, what are some of the tax steps you incorporate into your January routine? Do you find it advantageous to file early?
