That’s a Wrap: What I Learned

As the dust settles on another tax season, it is always good to reflect on the lessons learned. This tax season, although without any major deadline adjustments or mid-season tax adjustments, there were still things to learn and can offer valuable insights for next season.

Here are the Tax Man's six key takeaways from this year's tax season:

1. Organization is Key

One of the biggest lessons from this tax season is the importance of staying organized throughout the year. Trying to gather all necessary documents at the last minute adds unnecessary stress. I found many returns were prepared late in the season due to the client stating they were not organized.  Creating a system to file receipts, invoices, and other relevant documents as they come in makes the process much smoother. Digital tools, such as expense tracking apps, cloud storage, and digital organizers (see AM Digital Receipt Organizer), can help keep everything in one place and easily accessible.

2. Maximize Deductions and Credits

Every year, there are opportunities to maximize deductions and credits that can significantly reduce your taxable income. This tax season, I saw more returns taking advantage of deductions related to home offices, educational expenses, and charitable contributions. Keeping detailed records and receipts for these expenses is essential. Also, understanding the difference between deductions and credits helps in strategizing your tax planning more effectively.

3. Plan now or pay more later- Quarterly Taxes

For Gig Extraordinaires, freelancers and small business owners, paying quarterly estimated taxes is crucial to avoid penalties. This year, unfortunately I saw an increase in the returns that included an underpayment of estimated tax penalty. The importance of setting aside a portion of income each month specifically for taxes cannot be understated. Using accounting software to track income and expenses makes it easier to estimate and pay these taxes on time. This penalty is not just a self-employed issue, this penalty can be incurred by W-2 earners as well.

4. Know your W-4/Review Your Withholding

Many people were surprised by their tax bills or refunds this year due to incorrect withholding. This is why it is good practice to review and adjust your W-4 form with you employer, yearly. Especially after major life events like marriage, having children, or significant changes in income. This ensures that the right amount of tax is being withheld from your paycheck throughout the year.

5. Stay Ahead with Year-Round Planning

Tax planning should not be a once-a-year activity. Regularly reviewing your finances, keeping track of deductible expenses, and staying informed about tax law changes can make the next tax season easier. Setting aside time each month to review your tax strategy can result in better preparedness and fewer surprises. (See TTU)

6.  Don’t re-invent the Wheel-Embrace Technology

Utilizing technology can simplify tax preparation. From scanning receipts with your phone to using tax preparation software, these tools can streamline the process. This year, I discovered several apps and software that made tracking expenses and filing taxes more efficient and accurate.

 In wrapping up, each tax season is different, an opportunity to learn and improve. By staying organized, maximizing deductions, planning for self-employment taxes, reviewing withholding, planning year-round, and embracing technology, you can make tax season less stressful and more beneficial. Remember your Tax Man always says,