With a new year underway, tax season has arrived. If you don’t want to be subject to the last-minute rush, you need to start preparing now for April.
Here are a few things to take care of now:
Update Your Personal Information
Double-check the personal information you provide to others. If you are a freelancer, or some other type of contractor, look at your W-9. Have you made changes to your address or anything else? Your clients will need current information for preparing 1099-MISC forms.
Additionally, look at other information that others have. If you have moved, you need to make sure that your former employer, mortgage lenders and banks have your new address so they can send the paperwork. (You can also find out if it’s possible to access your tax documents electronically to reduce the need to send out your address.)
Don’t forget that you will need to share name changes as well. If you have changed your name in the last year (including if you have changed your name due to marriage), you need to make sure that the Social Security Administration has your new name. Your e-file attempt has to match what the SSA has in order to work.
Send Out Forms that You Owe to Others
Are you a business owner? Do you have household employees that clean or nanny for you? If so, you might need to send out forms. Household employees require W-2 forms. If you hire contractors to do work for your business, you need to issue 1099-MISC forms. And, if you collect payments on private mortgages, you need to send your borrowers 1098 forms. Consider which of these forms you need to send out to others, and get them out before the end of January. You need to file a copy of the 1099-MISC to the IRS by February 28.
Get Your Paperwork Organized
One of the best things you can do is to get your tax documents organized as quickly as possible. It works better if you organize your taxes year round (this is what I do), but if you haven’t, now is a good time to get started. If you have a real mess on your hands, starting early can help you straighten it out before you need to file.
Make sure you know which forms you have coming in. If you have a business, prepare a profit and loss statement, as well as other financial statements that you might need. You might also need to get your payroll in order. Gather all your documents, and make sure that you have receipts for charitable donations and business expenses. Proper documentation is increasingly important these days.
Make an Appointment with Your Accountant
If you have an accountant prepare your taxes, make an appointment now. I usually don’t actually visit my accountant until near the end of February, but I make the appointment in late December or early January. Accountants start seeing their schedules fill up this time of year, and if you want to go in at your preferred time (or even make sure that you can get in at all), you need to make your appointment ahead of time. In most cases, you can’t call an accountant during tax season and expect to get in tomorrow.
The more you do now, the better off you’ll be in the long run. You don’t want to be caught in April, clueless as to what you’re missing, and scrambling to pay what you owe. It’s true that you can file an extension, but that doesn’t let you off the hook from paying your taxes by April 15. It’s better if you have a good idea of where you stand well ahead of time.