10 Tips for a Better Tax Season Next Year
Apr 28th 2011 10:00AM
Updated Apr 28th 2011 9:59AM
Only that's not exactly what you should be doing. In fact, the weeks right after tax season are a great time to reflect upon what went right - and what didn't - with respect to your taxes and financial matters.
To help you learn from your mistakes -- or keep up your healthy habits -- following are the 10 best tips to learn from this past tax season and get ready for next one:
- Get organized. You'll need your 2009 tax returns for the 2010 tax season so don't just toss them in a box and forget about them. File them where you'll be able to find them quickly. Better yet, scan and save your return to a CD or to your hard drive (and be sure to back it up).
- Don't forget your follow through. If you filed a tax extension -- or you have additional forms to file such as the Report of Foreign Bank and Financial Accounts (FBAR) due in June -- don't forget you still have work to do. Make sure you meet any remaining deadlines.
- Make estimated payments. If you owed money with your 2009 tax return, consider making estimated payments in 2010 to avoid the same result next year. You can use the IRS form 1040-ES (this downloads as a pdf) to figure and make your payments.
- Adjust your withholding. Getting a refund is always fun. But if your refund is very large and it wasn't due to a one-time, unexpected tax benefit, such as the refundable adoption credit, you should consider changing your withholding status so you keep more of your own money during the tax year. If you need help, use the IRS online withholding calculator to figure out what's best for you.
- Invest in some software. Organizing your financial information come tax time generally takes much longer than actually preparing the return. Keep things simple by using a personal finance software package. If you enter your transactions as you go (or download them from your bank), you'll be ready come tax time. Take note: Some banks even offer software as part of their online banking service.
- Interview a tax professional. It can be difficult to find a good tax professional during tax season when both of you are facing a time crunch. With most of the rush over, now's a good time to call or meet with a few candidates to see who might be the best fit to work with next year.
- Meet with your financial advisor. This is also a good time to arrange a good sit-down with your financial advisor and figure out what you might do differently next year. Did you fail to take advantage of potential capital losses? Could you have benefited from contributing to a retirement account? Would it make sense to invest in some tax-exempt bonds? These are the kinds of questions to ask now so that you can plan ahead for next year.
- Think about the impact of major life decisions on your taxes. Are you expecting? Divorcing? Buying a new house? Retiring? Major life decisions could potentially impact your federal income tax picture. If you're planning to make a big change, ask your tax professional for advice.
- Resolve to keep better records. In order to stay organized, consider a new record-keeping strategy. You might want to try a different household filing system or buy a hand-held scanner to keep receipts and other records at your fingertips.
- Don't get discouraged. So maybe tax season wasn't a breeze this year. Maybe you owed more than you planned or you struggled to find your records. Keep in mind that was last year. Tell yourself that you'll do better this year - and then do it.