Tax Season is here
Tax season is here, and while it can seem overwhelming, preparing ahead of time can make the process much easier. Whether you’re still working, newly retired, or enjoying the benefits of retirement, taking the right steps will help you file with confidence—and maybe even uncover opportunities for savings. Let’s work together to ensure you're prepared and feel confident about your financial future.
1. Organize Your Documents
Staying organized is key to avoiding last-minute stress. Make sure to gather all the necessary paperwork for tax time, including:
Income Statements: Collect any W-2s from your employer (if still working), 1099s for freelance or contract work, and statements for other income sources like rental properties or investment earnings.
Interest and Dividends: Form 1099-INT for interest income and 1099-DIV for dividends from your bank or investment accounts (note that forms may not be available until 03/15).
Retirement Distributions: If you're retired and receiving income from your retirement accounts, include your 1099-R forms for distributions from pensions, 401(k)s, IRAs, or other retirement plans (forms will be available by 01/31).
Retirement Contributions: If you’ve contributed to retirement accounts like an IRA or 401(k), gather documentation showing the amounts. Form 8606 must be filed every year you make a nondeductible contribution to a traditional IRA, as well as when you take distributions or rollovers from an IRA that contains after-tax contributions.
Health Savings Account (HSA): If you’ve contributed to an HSA, form 5498-SA will track contributions and withdrawals.
Charitable Donations: Gather receipts or bank statements for any charitable contributions made throughout the year, as these may be tax-deductible.
Mortgage or Rent Payments: If you own a home, collect your mortgage interest statement (Form 1098), property tax bills, and other relevant documents.
2. Review Your Tax Withholdings
Whether you’re working or retired, it's important to review your tax withholding. If you receive distributions from retirement accounts, ensure the correct amount is being withheld for taxes. Also, remember to factor in state taxes if you live in a state with income taxation. You can adjust your withholding with your employer, Social Security, and retirement account distributions.
3. Factor in Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs)
If you're 73 or older, the IRS requires you to take RMDs from your traditional IRAs, 401(k)s, and other tax-deferred accounts. Failing to do so can result in hefty penalties. A QCD allows individuals aged 70½ or older to donate directly from their IRA to a charity, reducing taxable income and potentially satisfying your RMD while supporting causes you care about.
4. Consider Professional Help
While we focus on tax planning throughout the year to minimize your tax liabilities and help your retirement savings work more efficiently, tax laws can still be complex. A CPA or tax preparer can help navigate your specific tax situation and ensure you're making the most of any deductions or credits available. If you need help finding someone who might be a good fit, let us know—we’re happy to assist.
5. Prepare for the Future
As you review this year’s tax situation, it’s a good time to think ahead to future years as well. If your income has changed, you anticipate large capital gains, or your spending has shifted, you may want to adjust your withholding for the coming year. We also recommend considering ways to reduce taxable income, such as contributing to tax-advantaged accounts like IRAs or making additional charitable donations if you’re eligible.
Wrapping Up
By staying organized, reviewing key documents, and planning ahead, you can reduce the stress of tax season—and maybe even uncover ways to reduce your tax bill. If you have any questions or need help navigating your investment-related taxes, don’t hesitate to reach out. We’re here to help you make the most of your tax strategy.