Rearview Taxes and How to Prep for Next Yeartax tips | April 20, 2018 | By Susannah McQuitty
Honestly, the most time-consuming part of filing every year isn’t completing the tax return but gathering all the info you need. From password juggling to income forms and deduction records, tracking down all the minute details once a year is a pain—unless, of course, you have a strategy for your finances that helps keep everything organized.
Here are some ways you can prep for filing a year in advance to save yourself a headache in 2019.
Review tax reform
You may have heard that major tax reform only happens once every 20 to 30 years, so it’s a big time for taxes and high time to start figuring out how the new laws will affect you.
Many people will have lower tax rates (due to tax bracket changes) and bigger tax breaks (from the higher standard deduction and Child Tax Credit), so it’s a good idea to review how the changes will alter your personal finances. Do you need to withhold less? Would you rather have a big refund next year or more money in your pocket per paycheck?
Check out our overview of the new tax bill and keep your eyes open on the 1040.com blog; we’ll be diving in to the details over the next few weeks in a series on how the new tax laws may affect millennials, families and freelancers.
Plot your financial goals
Since your tax return is essentially a compilation of your key financial markers, now’s the perfect time to review what worked (or what didn’t) and plan ahead. What’s coming up in the next year? Maybe you intend to get married, have a kid, buy a home, start a business, enroll in grad school, or open a savings account.
Lay out a calendar of events and estimate your financial situation from month to month. Keeping that information as a reference will help guide your spending and saving—which leads us to the last point.
Adjust and budget
Once you’ve organized, reviewed how tax reform is going to affect you, and plotted out your financial goals, it’s time to set yourself up for success.
If you want to control the size of your tax refund next year, make the necessary adjustments to your withholdings on Form W-4. Develop a budget for the year that you can break down per month and implement your savings strategy (whether that means creating a new account or scheduling money flow from your paychecks).
And there you have it! Your brand new, big-picture vision gives you a solid foundation, and your plan for the next 12 months is there for future reference.
Let us know how you’re preparing for the next year in the comments below!