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How To Prepare For Tax Season

This blog post was updated on 2/12/2020. 

By Kyle Ferrare

No matter how you feel about tax season the fact is that taxes are unavoidable. But that doesn’t mean the stress and anxiety that often accompany tax season is also unavoidable. The fastest way to shake this added stress is to get everything in order now so you can get back to focusing on things you love instead. Don’t let yourself be one of the 29 million people who stretch the anxiety of tax season out and file their taxes at the last minute. Start preparing now and eliminate some of your looming stress by following these four steps.

1. Organize Your Documents

Preparing your taxes usually includes piles of paperwork and it is tempting to ignore that pile until it’s no longer possible. However, taking this approach leaves you at a higher risk of missing possible deductions and making mistakes. A great way to avoid leaving money on the table is to get all your documents well organized before you start filling out your forms. Your efforts to clear up some of the chaos today will make filing much faster and easier in the end.

To start, you will want to be sure you have copies of the most commonly needed documents that apply to you, such as: 

  • W-2, 1099, or other records of income
  • Records of charitable contributions over $250
  • Information from prior years’ tax returns
  • Rental income
  • Mortgage interest and property taxes paid
  • Dividend income
  • Childcare costs
  • Medical expenses

Tip: Make a master list of all the forms and documents you need. You can even use last year’s return to remind you of which forms your unique situation requires. As each document arrives in the mail, check it off and add it to your organizer. Having this checklist will help assure you that you are well prepared. To help you out, we have created a handy checklist for you:

Download the Checklist

2. Take Advantage Of Deductions And Credits

Benjamin Franklin may have been right when he declared that “nothing is certain except death and taxes,” but that does not mean you can’t do your best to reduce your tax bill. Fortunately, there are multiple credits and deductions that will not only benefit you this tax season but also serve to give your financial future a boost.

Make Deductions Work For You

If your employer offers a 401(k), you can reduce your taxable income by contributing up to $19,500 in 2020. If you are over 50, you can also take advantage of catch-up contributions of an additional $6,000. If you do not have the opportunity to save through an employer-sponsored plan, you can still invest in an IRA, depending on your income.

Contributions to HSAs (health savings accounts) are also an excellent option to reduce your total taxable income. The 2020 contribution limits for HSAs are $3,550 for an individual or $7,100 for a family. You can also make a $1,000 catch-up contribution if you are over 55.

Just because we have turned the calendar to 2020 doesn’t mean you can’t maximize your retirement savings and reap the rewards on your 2019 taxes. For the 2019 tax year, you have until April 15th to contribute to HSAs, Roth and traditional IRAs, SEP IRAs and self-employed 401(k)s to benefit from this deduction, so jump on this opportunity to build your nest egg and reduce your taxable income while you can!

There are some additional deductions that may also apply to you, such as state sales tax on major purchases, student loan interest, and medical and dental expenses. However, due to the new higher standard deduction, itemizing your taxes and applying these deductions may not work in your favor. To make sure you keep as much of your hard-earned money as possible, be sure to speak to a tax professional about tax strategies that will maximize your deductions under the new tax laws.

Research Applicable Credits

Depending on your situation, you may be able to benefit from a variety of credits. Many Americans qualify for the Earned Income Tax Credit, and if you or your children attend post-secondary education, you could benefit from the American Opportunity Credit and the Lifetime Learning Credit. There are also credits for saving for retirement and child and dependent care. A qualified CPA will know what questions to ask and what to look for, so you don’t miss out on any opportunities to minimize your tax bill.

3. Reevaluate Your Filing Status

Have you experienced a significant life change this year, such as marriage, divorce, or the birth of a child? Any of these milestones will affect your filing status, which determines your tax rates, deductions, and eligibility for credits. Make sure you are filing under the correct status so that you don’t face unnecessary penalties or taxes.

4. Find A Professional You Can Trust

In America, over 1 million accountants are hired every year to help with taxes. That is a lot of help, and it’s not without good reason! Working with a qualified and seasoned accountant can make your tax prep and filing experience as seamless and stress-free as possible. They have the knowledge to help you claim the deductions you deserve, account for many variables unique to your situation, and answer any questions you may have. Utilizing their expertise can save you money in the long run and give you peace of mind.

Not only that, but a CPA can also provide suggestions that will help you reduce your taxes for years to come, such as offering advice on tax-friendly ways to set up your estate and showing you the benefits of maximizing your retirement savings. Regardless of your financial status or current situation, having a CPA you trust to handle your tax needs is never a bad thing. At Simon Quick Advisors, we not only take the lead to coordinate your financial plan with your other financial team members, but we can also help you find a qualified CPA so you can have full confidence in your annual tax filings.

We’re Here To Help

Don’t let your stress levels increase as your time to file taxes decreases. Do yourself a favor and take these steps now to get ready for tax season so you are not scrambling at the last minute.

Contact Us

About Kyle Ferrare

Mr. Ferrare joined Simon Quick in 2011, and works directly with high net worth clients in developing and implementing their investment and financial planning goals. Based in Denver, CO, Mr. Ferrare also works with single family offices, endowments and foundations and regularly attends investment committee and board meetings. Prior to joining Simon Quick, Mr. Ferrare spent five years in the Private Client Advisor Practice at Deloitte Tax LLP. He provided tax advisory services to a variety of private clients including high net worth individuals, investment partnerships, corporate executives and owners of closely-held businesses. Mr. Ferrare graduated from Bryant University with a BS in Finance. He completed the Financial Planning Certificate Program at Fairleigh Dickinson University in December 2009 and became a CERTIFIED FINANCIAL PLANNER™ practitioner in November 2010. In April 2014, Mr. Ferrare became a Chartered Alternative Investment Analyst (CAIA). To learn more about Kyle visit his LinkedIn.

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