Filing your Federal and state income tax returns each spring is never a fun activity. This year, people are getting an unpleasant surprise as they file their 2018 returns, too. In the wake of the recent changes to Federal tax laws, many taxpayers are reporting refunds that are considerably smaller than expected. While it may be too late to optimize your 2018 tax return, there’s always next year. Here are five steps you can take to get your tax situation on track for 2019.
1. Get Organized
If you want to get the most out of your 2019 tax return and avoid headaches next spring, start getting organized right now. Create folders–both the paper and the virtual kinds–to help you keep good records of important documents. If you itemize, place copies of business and personal expense receipts in folders so you can find them easily later on. Keep records of any charitable donations in good order as well. Use a ledger, spreadsheet, or accounting software to record and classify any financial transactions that you may have to account for at tax time. When you do start receiving official tax forms, such as W2s and 1099s, keep those filed and organized as well. Having all your documents and information at the ready will keep you on track when it comes time to file your 2019 tax return.
2. Contribute Regularly to Your Retirement Plan
People often wait until the last minute to pay into their retirement plans, and then lack the funds required to maximize their contributions before filing their taxes. If you’re proactive and start early, it should be easy to contribute to your retirement plan without squeezing your disposable income. If you’re disciplined, and you contribute a small amount of money each month, you’ll be able to reach your maximum contribution level well before 2019 ends. Doing so will help you optimize your tax position, and put you on track for a good 2019 tax return.
3. Be Charitable All Year Long
Supporting charities and other worthy causes is the right thing to do. It can also help you improve your tax position for 2019, so ensure you’re in a giving mood throughout the entire year. Make an effort to support charitable activities regularly; donating clothes and other household items to thrift stores is an easy, low-impact ways to do this. Providing your serviceable household goods to thrift stores and other benevolent organizations helps support at-risk communities. The donations are often tax deductible too, so ensure you keep very good records of them. If you support charitable causes throughout 2019, you’ll likely be on track to optimize your tax return next spring.
4. Consider Getting Help
Millions of Americans use tax software each year to successfully prepare their tax returns. If you’re one of them, perhaps you should consider finding a trusted tax advisor to help you prepare for tax season instead. If you start working with an accountant early in 2019, you could take advantage of that person’s expertise to put yourself in the best financial position possible when it’s time to file your taxes. Forming a long-term relationship with a tax advisor could also be extremely helpful. Even if your tax situation is relatively simple right now, it could change over the years. A tax expert who knows you well will be able to help you avoid pitfalls and take advantage of fleeting opportunities that you might otherwise miss.
5. Don’t Wait Until the Last Minute
Millions of Americans wait until the very last minute to file their tax returns each year. If you don’t usually begin working on your taxes until a few days before the deadline, consider starting earlier in preparation for April of 2020. Preparing your taxes early means you’ll have time to find any missing documents without worrying about some sort of penalty. Tax advisors will likely be less harried if you sit down with them earlier in the season, too, and give your return more attention. This might lead to opportunities to go out and take actions that can put you in a better financial position before your tax return is due. The earlier you start getting your tax information ready, the better chance you’ll have for being on the right track when you actually file your return.
If filing Federal and state income taxes stresses you out every year, make a change this year. However, it’s important to remember that we are not tax professionals and you should consult with a tax professional before making any important financial decisions. If you’re interested in getting on solid financial footing next year, start making a change today and get on track for a great tax year in 2019!