As tax season draws to a close, many consumers feel a sense of relief. They are done with taxes, and not anxious to start on another tax season.
However, it might actually be a good idea to start planning for next year’s tax season now. Rather than forgetting about taxes until the end of the year, consider what’s coming for the year. Here are 3 reasons to start planning for next year’s tax season now:
1. Better Organization = Less Stress
Better organization can mean less stress. If you keep your documents organized throughout the year, you will be less likely to miss something later. Additionally, you won’t be scrambling to find everything at the last minute.
Make it a point to be better organized for taxes all year, and you’ll be in better shape overall when tax season rolls around again. Plus, you’ll be able to file sooner. If you are expecting a refund, that means you get your money that much faster. On top of that, the earlier you file, the less likely it is that a fraudster can file a tax return in your name and claim the refund that belongs to you.
2. Reduce Your Income
One of the biggest scrambles at the end of the year is the effort to find more deductions to reduce your income. Planning ahead, though, can help you manage your deductions without straining your cash flow. Making large last-minute donations to charity in December, or frantically deciding which investments are best for tax loss harvesting two weeks before the end of the year, can put a crimp in your cash flow.
Instead, pay attention to these items throughout the year. Make it a point to give to charity regularly so that it is part of your budget, and it doesn’t strain your cash flow to make an extra donation. Pay attention to capital gains and losses so you know which investments you should be selling, and when it makes sense to sell them.
Other deductions can be planned as well. From business deductions to moving expenses, there are ways to reduce your income. Reducing your income means less to be taxed on, so you have a lower bill. Make it a point to plan throughout the year, and you can keep your income to a level that makes your taxes manageable.
3. Take Advantage of Tax Credits
When you plan for your taxes year-round, you have the chance to take advantage of available credits. There are a number of credits that you might be eligible for. In some cases, the right deductions can help you qualify for certain credits like the EITC and the Additional Child Tax Credit.
Other credits require a bit more planning and paperwork. There are still green tax credits available when you upgrade your home energy system with solar panels or some other energy efficient system. These types of projects take planning, though; most of us can’t afford to put in a new energy system on a whim.
Look ahead to what might help you reduce your tax liability, and make plans for adding more credits to your form. With planning throughout the year, you can reduce tax liability and get rid of most of the stress related to tax time.