Plan for Your Next Tax Return
Fail to Plan Is Plan To Fail!
At the end of the year, begin planning for the next tax return to get a head start on your taxes. Once the new year begins, it is time to begin getting all your documents in order for Tax Year 2022. e-File your 2022 Returns in 2023 so you do not have to worry about manually filling in complicated IRS and state tax forms; e-file by April 18, 2023.
Why to Plan Early
Tax planning is the process of acquiring the latest tax knowledge and taking the necessary steps to reduce your income tax burden. You pay taxes with your hard-earned money, you should be in control of how much money you take home with each paycheck. Taxes can be complicated and stressful and you could waste your money if you don't plan properly. Take control of your taxes: work with the right people and reliable websites with simple and free tax tools to understand your finances. Use these easy-to-follow tips to help minimize stress about your taxes: stupid and smart things taxpayers do when filing taxes.
Related: How easy is it to file taxes by yourself?
If you want to either reduce your taxes or increase your refund for your next return, then tax planning throughout the year is critical. In addition, when planning for life changing events (marriage, home purchase, career change, etc.) you should also consider the possible tax implications. The same is true for unplanned life changing events; they might have unplanned tax consequences.
For example, certain contributions (e.g. medical plan contributions, etc.) have to be completed by the end of the calendar year. In the case or a marriage or divorce, December 31st is the key date when it comes to selecting your filing status. The source or type of income you receive throughout a tax year will also help determine your taxable income.
Generally, most qualifying tax deductions and tax credits for a given tax year have to be expensed by December 31st of the applicable tax year. An exception is retirement plan contributions; an IRA contribution can generally be made all the way up until the April 15, 2022 filing and payment deadline.
Here at eFile.com, we help you with tax planning by not only providing free tools and tax calculators to help you, but we also ask you relevant questions that could lead to a reduction in your income taxes. December 31st is a critical deadline for each tax year. When you sign up for a free eFile account, you can also work with a Taxpert® who can provide personalized support to your tax questions.
Tax Planning Guideline
1. Year-Round Tax Planning: January 1 - December 31
The IRS recommends that you keep all tax-related records for 3 years in case of an audit. However, old tax documents (such as last year's W-2's) can come in handy when you are filling out your current year's tax return. An example of some of the tax records you should store from previous years (and reference for next year's income tax return) is listed below. If you e-file your taxes via eFile.com, part of our customer service is to provide you a PDF copy of your IRS and state tax returns for the past 7 years.
2023 Tax Planning
This is not an exhaustive list and you my have additional forms or receipts that are not listed below. To make your mountain of documents easier to store, try scanning them and keeping them as PDF files; you can print them out if you need them. If you do this, remember to back up your computer files!
- As for current tax year planning, you can start by collecting W-2's, 1099 forms, medical expense receipts, charity donations, retirement contributions, child care expenses, alimony payments, canceled checks, and your previous year returns. This will help ensure you are ready to file next year's tax return or prepare for a possible tax audit.
- Keep records for at least 3 years in case of an IRS tax audit. For your own peace of mind, you might want to keep them longer. Start a file folder at the beginning of each year and put all of your receipts into it.
- Check your pay stubs against your W-2 to make sure they add up. Even employers can make mistakes!
- Study last year's tax return. Are there any credits and deductions which you are still qualified to take? Are there any you did not take, but you qualify for now?
- Donate to charity! The IRS generally only requires receipts for charitable contributions of $250 or more, but it's a good idea to keep receipts for any donation.
- If you have planned your taxes successfully enough to receive a small tax refund, you should invest it in an educational savings account, an IRA, or a savings account at your bank. Use the money to start preparing for next year's taxes.
- You can take either the standard tax deduction or you can itemize deductions. To get an idea of which is more beneficial for you, see our tax calculator and itemize your deductions, then see whether the resulting amount is higher than the standard deduction available to you. Always choose the higher amount! When you prepare your return with us, our software automatically uses the best deduction method for your tax situation.
- Review existing retirement plans or contributions or start a new one.
- Look at these tax saving options or honest taxpayer loopholes.
2. From April 15 - October 15
3. From October 16 - December 31
4. Tax Time Planning: January 1 - April 15 of the New Year
In most years, April 15th is the general tax return filing/tax payment deadline. If you miss the April 15th (for 2023 it is April 18) deadline, you can still e-file your return until the October deadline. During this time, the IRS requires federal income tax returns to be filed for the current tax year. Most states also require state income tax returns to be submitted during the same time period. e-File your federal and state returns together on eFile.com so you do not have to mail anything!
During tax time, follow the steps for proactive tax planning as listed under points 1 - 3 above. As a reminder:
Plan Now. Avoid Surprises Later.
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