Tax Season Is Over — Now’s the Time to Start Preparing for Next Year
For many people, tax season ends with a sigh and a deep sense of relief. The return has been filed, the paperwork is done and you’re tempted to forget all about taxes … at least for another year.
But waiting until next spring to start thinking about taxes again could mean missing valuable opportunities to improve your financial situation. In fact, the weeks and months immediately after April 15 are actually one of the best times to start preparing for next year. With all the details still fresh in your mind, it can be easier to identify tax-saving strategies that may help reduce surprises.
Recap This Year’s Return
Your recently filed return can provide valuable clues about what changes may be worth considering. If you received a large refund, it could mean more taxes were withheld from your paycheck than necessary. And while some people may view
withholding more funds than necessary as a way to avoid a big bill in April, others may prefer larger take-home pay throughout the year.
On the other hand, if you owed a significant amount at tax time, you may want to review your withholding to avoid a similar situation next year. Even small adjustments now can make a meaningful difference by the following year’s filing deadline.
Revisit Retirement and Health Savings Contributions
Tax season can also be a good reminder to review workplace savings opportunities.
Increasing contributions to a traditional pre-tax retirement account may help reduce current taxable income while boosting long-term savings and retirement readiness. Depending on your plan, Roth contributions may also be worth considering as a way to create additional flexibility when managing taxes in retirement.
It may also be worth reviewing contributions to a health savings account (HSA) or flexible spending account (FSA), if available. These accounts can offer valuable tax advantages while also helping to cover health care expenses.
Stay Organized Throughout the Year
Many taxpayers spend weeks gathering documents and receipts shortly before filing. A little proactive organization during the year can make the process much easier next time around.
Create a simple system for tracking potentially deductible expenses, charitable donations, medical expenses or business-related costs. Whether you use a spreadsheet, budgeting app, digital folders or paper filing systems, keeping records organized as expenses occur can save time — and stress — later. The goal is to avoid scrambling for information when tax season returns.
Pay Attention to Side Income and Investments
Additional income sources can create often-overlooked tax liabilities. If you earn extra money through freelance work, consulting, online sales or other side activities, you may receive a Form 1099 and be responsible for taxes that are not automatically withheld. Monitoring additional income throughout the year can help you avoid an unexpected tax bill.
Moreover, investors should keep an eye on taxable investment accounts. Selling investments for a profit can trigger capital gains taxes, while tax-loss harvesting may help reduce taxes by using investment losses to offset gains elsewhere in a portfolio. Charitable giving strategies may offer opportunities to support causes you care about while potentially providing tax benefits.
Turn Tax Planning into a Year-round Habit
Some of the most effective planning can happen long before filing season arrives. By reviewing withholding, evaluating savings contributions, tracking expenses and monitoring investment and income activity throughout the year, you can take greater control of your financial future.
The key is to view your recently filed return not as the end of the process, but as the beginning of tax planning for the year ahead. Small adjustments today could help lead to fewer surprises and better financial outcomes when next tax season arrives. If you have questions, speak with a Financial Professional.