5 Things to Do to Get Ready for Tax Season

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5thingstaxseasonsmThough it may be the last thing you want to think about right after the holidays, tax season is right around the corner. And now is the time to take some simple steps that will make your life so much easier when it’s time to actually file your taxes. Do them one at a time, and in small increments, to avoid being overwhelmed – you’ll be done by the end of the month, and you’ll be thanking me in April.

1. Consolidate tax-related papers. – We’re talking documents like receipts for charitable donations and business expenses, property tax records, and medical bills. If you organized your tax documents as they accumulated last year, you’re already set. If not, I highly recommend establishing a system for doing so in 2013 – you’ll be happy you did in January 2014. Last year at Chief Family Officer, I explained how I use two multi-pocket file folders dedicated to this purpose to simplify tax-related paperwork.

2. Prepare to receive tax documents that arrive by mail and email. Odds are good you’ll be receiving at least some tax-related documents in the mail or by email. Your mortgage lender needs to let you know how much interest you paid on your mortgage last year, your bank needs to let you know how much interest you earned, your employer has to send you a W-2, and so on. Designate a place to collect these documents so you can find them easily when you’re ready to file. In fact, one of the pockets in each of my multi-pocket folders is for collecting these sorts of documents in January so all of my tax-related paperwork stays together.

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3. Determine whether to contribute to eligible retirement and/or education accounts. Did you know that you can contribute to certain retirement and education accounts before April 15, and apply that contribution to the previous tax year? For example, if I didn’t contribute anything to my IRA in 2012 and contribute the annual maximum of $5,000 tomorrow, I can contribute an additional $5,000 later in 2013. It’s a great way to make the most of contribution limits, and can also reduce the amount of tax you’ll owe for the previous year if you contribute to tax-deductible accounts. Just be sure you’re eligible to contribute to these accounts, since they have income limits.

4. Determine how you will file your taxes. You might choose to do it yourself, or to hire a professional. Regardless of which route you go, now is the time to make some preliminary decisions, such as which software or program you want to use, or which professional you are going to hire. If you will be using a private CPA, be sure to get in touch early to make sure that they can take you on or plan to keep you as a client – you don’t want to find yourself scrambling to find a new CPA in April!

5. Start saving if you think you will have to pay additional taxes at filing time. If you suspect you’ve got a big bill coming in April – for example, you deliberately decreased your withholding last year, or had a lot of untaxed income – now is the time to start saving. You don’t have to make any drastic moves, but even simple steps like skipping Starbucks and earmarking that $4 for the tax bill can give you a huge sigh of relief come April 15.

Each of these steps may seem psychologically daunting, but can easily be accomplished in 15 minutes if you’re focused (set a timer and see). You’ll be happy you did when April rolls around!

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Cathy is the founder of Chief Family Officer, where you can get daily updates on the hottest deals, and tips to achieve financial freedom and family bliss.