6 Smart Ways to Get Prepped for Taxes Ahead of Time

published Jan 8, 2022
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Tax Day isn’t until April 15, but it comes up fast — and there’s nothing worse than the last-minute shuffle to get everything together for your CPA or TurboTax session. If you find yourself hunting for W-2s or 1099s and sending in your info just in the nick of time (or a few days late) and want to reduce that stress for 2022, you’ve got this. These tips from tax and financial experts will help you prep your documents and get your files in order like a pro. 

Keep everything in one place.

As someone with a full-time job and a handful of freelance gigs, my top tip for success is to put any tax-related forms in a designated folder on your desk or a specific spot in your home as soon as they show up in the mail. You don’t even need to open the envelopes right away — just make sure they get where they need to go so they aren’t accidentally recycled or buried under piles of bills and catalogs. 

Jay Zigmont, founder of Mississippi-based financial planning firm Live, Learn, Plan, agrees — especially if you’ve recently moved. “If you moved in the last year, make sure you have an active change of address filed with USPS,” he tells Apartment Therapy. “Even if you think you have updated all of your accounts, you want to make sure you get any tax documents sent via postal mail.” 

If you own a small business or receive 1099 income, you’ll want to collect any expenses related to that business. “This can include things like a mileage log if you were driving for Uber,” Zigmont says. “Also, make sure you know what estimated tax payments (often called quarterlies) you made over the year. If you did not make estimated payments, you may owe quite a bit.” It’s a good idea to keep all receipts and expenses in a folder if possible and to track your quarterly payments on the calendar for ease of reporting them come April.

Make sure you have all of your tax documents before you get started.

After Jan. 1, tax documents start flowing through the mail, but you may need more than just a traditional W-2 or 1099. Kemberley Washington, tax analyst and CPA with Forbes Advisor, recommends making sure you have every single form in place before getting started. “Take time to organize your tax documents and financial records, which can make the actual filing process faster and easier,” says Washington, who previously worked for the IRS. This could include everything from student loan interest statements (1098-E), stimulus payment statements (Notice 1444-C), a mortgage interest statement if you own a home, and any receipts for charitable donations you may have made.

Revisit last year’s return.

“Use your prior year’s tax return to serve as a starting point to determine your previous income, deductions, and credits reported,” Washington recommends. You’ll also want to pay attention to any changes that happened throughout 2021. “There are elements that might make your taxes this year different from previous years, including stimulus payments, child tax credit, and unemployment,” she explains. “Make sure to plan ahead for these changes.”

Create an online account with the IRS.

Setting up an IRS account is an especially good tip if you have outstanding tax debt, pay quarterlies, or just want to double-check anything. “This is a great way to obtain your tax documents without having to contact the agency by phone or mail,” says Washington. “This feature allows you to log into an account and check payment balances, set up payment arrangements, and view prior-year tax returns and reported tax forms.” 

Put some money aside for potential payments.

Do you suspect you may owe taxes or need to begin paying quarterlies throughout the year? Head to the bank and set up a special account for tax savings so you aren’t strapped when due dates are on the horizon. If you’re a freelancer, try to set aside about 30 percent of your earnings for taxes if you can.

Know when to call in a professional.

If you own a small business, work contract or freelance, or have a side hustle, it may be worth working with a tax professional come tax season. Even PayPal and eBay count if you make a certain amount of money from these platforms! In those more complicated situations, “it is probably worth it to pay someone to help you with your taxes,” Zigmont says. Doing your due diligence will help reduce your stress and potentially the bill from a CPA. “The more organized you are, the less time it will take someone to help you — and you should pay less.”