Last Updated on February 13, 2023 by Faiza Murtaza
Tax season is always right around the corner, and not everyone is prepared when it arrives. This can result in making mistakes on your tax return that you will have to amend later or even forgetting to report some assets altogether. Put simply, now is the perfect time to make sure you plan ahead so that everything goes smoothly and you get the tax refund you anticipate. To make sure you take all the right steps, here are a few tips on how to prepare for tax season.
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Get all of your materials together in tools like folders and envelopes.
There’s a lot of paperwork that goes into doing your taxes, even if you’re using tax software to report your income and investments. Having your previous tax returns and other financial documents at the ready is a must for any tax-paying citizen. You can do this by investing in tax return folders to keep your important documents organized and in one place. Even better, you can customize your folders so that you know exactly what goes in them when you start putting your documentation away. Although file folders may not be as prominent in the age of laptop computers, they can still be great to have in case you need access to it or you need to give everything over to your tax preparers.
Make sure that you understand the tax guidance regarding your investments.
Some people will invest in trending items without a full understanding of how it will impact them financially when they decide to sell. For example, there’s a big chance that you’ve invested in cryptocurrencies like Bitcoin or Ethereum if you saw their performance over the past few years and the potential for massive gains. If you sold, you now have to report your gains and losses to the IRS. If you mined any cryptocurrency or received an airdrop, you also have to report your cryptocurrency in the form of income. Enlisting the help of a tax professional or software calculator designed for these types of assets will help you along the way if you don’t know how to report or which reporting method to use.
Use a budgeting app to see your finances at a glance.
Having to go through all of your bank accounts and investment accounts to properly file your taxes can be a pain. The good news? You don’t actually have to do this. Instead, you can look into downloading a budgeting app to help you manage your finances more effectively. A great budgeting app will allow you to log into your financial accounts and regularly sync these accounts, display all of your recent transactions in one convenient dashboard, and even help you analyze your spending and income for greater results in your financial journey. Once you have the past year’s transactions in one place, you can calculate exactly how much you earned and categorize your earnings or investments to make reporting your taxes even easier on yourself. In a world run by tech, you’re sure to find solutions that make preparing and reporting your taxes easier than ever before.
Let’s face it: no one likes doing their taxes. However, the last thing you want to do is avoid it and end up forgetting to do them or misreporting your income and gains. To make sure that you’re ready for this upcoming tax year, use the advice above to get all of your necessary financial documents in order, research any tax guidance you may not be aware of, and make accessing your transactions and investment activity far simpler than it usually is.