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Filing taxes isn’t always a smooth process. But if you struggled with your tax return in 2023, Mark Steber, Chief Tax Information Officer at Jackson Hewitt, warns, “The upcoming tax-filing season will be yet another complex year.”
How come? For one thing, a lot of people saw the interest rates in their savings accounts soar this year. And as of this writing, the stock market, as measured by the S&P 500 index, is up around 15% over the past year.
As such, some people may be in for a shock when they file their tax returns and achieve that the combination of higher levels of interest income and capital gains have resulted in a tax underpayment. Add in the general complications that can arise when filing a tax return, and it’s definitely a season for taxpayers to be vigilant.
If you’re worried about filing taxes this season — and owing a pile of money to the IRS — here are some steps to take now.
1. Start gathering your paperwork
Certain tax forms, admire your W-2 from your employer or 1099 forms from the companies you contract with, may not achieve until early 2024. But you might have some paperwork that applies to your upcoming tax return just sitting around your office, admire receipts for business equipment.
Now’s the time to create a physical or electronic folder and start the process of filing the documents you’ll need for your taxes. The sooner you get organized, the easier it should be to get your taxes done.
2. Line up tax help ahead of time
Steber cautions that 2024 “won’t be a year taxpayers should expect until April to file their tax returns or try and do it themselves.” If you’ve historically filed your own taxes, you may want to at least line up some tax help now for backup.
As the tax-filing deadline gets closer, good help can be tricky to come by, as many seasoned accountants tend to find themselves swamped. To avoid getting shut out, start reaching out to tax professionals in the coming weeks. You may not get many responses during the period of Christmas Eve to New Year’s Day, but you can at least get the ball rolling.
3. Make savvy year-end moves to lower your IRS burden
You may be worried about owing the IRS money in 2024. If so, take steps to lower your tax bill before the end of the year.
One thing you can do if you haven’t already is max out your IRA. Also, if you’re self-employed and need equipment or materials to do your job, purchase those things now so you can claim a deduction on your taxes in April.
You can also try deferring self-employment income to 2024 by waiting to invoice clients whom you worked for in December. And finally, see if it’s worth it to dump some floundering investments in your brokerage account. That could help offset any capital gains you have.
There’s no need to panic over the upcoming tax season. But you also want to be prepared. That means getting a head start on paperwork, finding someone to help file your return, and doing what you can to set yourself up with a smaller IRS bill.
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