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5 tips to prepare for tax season, according to Pasito’s CPA [+ free tax document checklist]

Tax season is coming. (Nonchalant reference to the infamous Game of Thrones meme, yes. In case you couldn’t tell by the header image…)

But in all seriousness, if you haven’t started collecting and organizing your tax documents, now is the best time to start!

Why?

1. We’re mere weeks away from the 2021 filing deadline, and 2. By now, you most likely want to just get things over with. (Yes, I know it’s your least favorite time of year. And my most stressful!)

Join along as I share five tactical, high-level tips to help you prepare your return this year.

Get organized

Disclaimer: I understand that every return is different, and everyone’s personal situation varies. I also know it’s impossible to walk everyone through every situation.

But in close to a decade of filing tax returns for both individuals and companies, I can generalize and say one thing.

The key to success is being organized.

Have the tax documents you need to file your taxes in front of you and available. It actually does make filing much more pleasant from year to year, or at least significantly less frustrating. 🙂

Create a checklist

I’ve also found it incredibly helpful to keep a simple checklist with all the documents I needed the prior year. This includes where they came from—i.e. snail mail, email, online portal, etc.—and when I received them.

You’d be amazed at what a simple checklist can do. It works wonders for simplifying and demystifying what goes into your taxes (bonus points for keeping an online checklist!).

Having a checklist also helps you know that everything from last year is accounted for, and only the new stuff is what you have to add for the current year.

Don’t know how to set up a checklist? No problem!

Here’s a customizable tax document checklist.

Save a copy to the cloud

Once you have everything organized, it’s then time to scan or take a picture of your documents for online storage.

Having your documents stored online can be incredibly helpful in times of disaster, but also for easy and convenient access when you need to refer back to them. (Though let’s be honest. No one wants to look at their tax return more than they need to.)

Get the maximum tax benefit this year

If you made it this far, I can tell you’re serious about this tax season.

While tax planning far in advance can get you the most savings, at this stage, there are a few things you can do to ensure you squeeze out any available savings to lower your tax bill:

  • Double check for stimulus payments. If you received stimulus payments, make sure you report them. This is important because the IRS already knows what you received, and if you don’t agree, they will change your return to match their numbers. (I know. It’s silly. But this is the system we’re dealing with currently.)
  • Contribute to an HSA. If you have some extra money laying around and want to reduce your taxes in the 11th hour, the best option for most people is contributing to a Health Savings Account (HSA). To be eligible for one, you need a qualifying health insurance plan (typically a deductible more than $1,400 for single coverage, or $2,800 for a family).
  • Contribute to an IRA. If you can’t contribute to an HSA, the other option at this point is contributing to an Individual Retirement Account (IRA). But this also has some limitations depending on if you have a 401(k) through work, your income, and also your partner’s situation. Here is the nitty gritty for IRA deduction limits. And if you can NOT deduct your IRA contribution, fear not. You may be able to contribute to a Roth IRA and have the money grow tax free for later (no tax deduction now). Here is the amount of Roth IRA contributions you can make for 2021.
  • Check your flexible spending accounts. If you have any flexible spending accounts, they typically have a cut-off date of March 31 to submit receipts for reimbursement. It’s incredibly important to submit by the deadline as any money left in FSAs is forfeited and lost.

Turn things over to the tax experts, if you so choose

You have all your documents, and they have digital twins. Now, you can either (gently) dump them on your CPA’s desk or fire up your tax filing software and file them yourself.

No one way is better than the next, and there are actually MANY people who are able to file their income tax returns for free without needing to pay for the service.

Just keep in mind that if you go solo, look around online for free options as you almost never (insert disclaimer as there is always an exception in the world of taxes!) need to pay to file both your federal and state returns.

Once you enter everything into the software, pull out your (digital) copy of last year’s return and compare it side-by-side with the one you just prepared. If things are similar year over year and reflect your situation, go ahead and e-file.

Congrats! You’re done

With these tips, you’ll be filing your taxes like a pro in no time.

As I said at the very beginning, staying organized will be your superpower. Stay on top of the tax documents throughout the year, and by year’s end, you’ll have everything you need to make next tax season smooth sailing.

And remember to squeeze every last cent of savings out of your tax bill—a lot of which comes from maximizing your employee benefits. (Refer Pasito to your company to see how you can get financial and benefits guidance as an employee benefit. We can help you put thousands of dollars back in your pocket every year!)

So, with the heavy lifting done, I bid you adieu. Here’s to endless refunds and a much lower tax bill.

Philip Schommer

Philip Schommer came to Pasito after spending time in both public and private accounting roles specializing in all things tax. Philip is a Certified Public Accountant, real estate investor, entrepreneur, and giver of personal finance advice to all those who will listen. Philip is dad to Aubrey and Evelyn and husband to accountant Julie, thus providing endless riveting dinnertime talk of personal finance, spreadsheets, and accounting principles.
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