How to Prepare for Tax Season Throughout the Year

Tax season doesn't have to be stressful if you stay organized throughout the year. By taking small, proactive steps, you can make tax filing easier, ensure you don’t miss any deductions or credits, and avoid the last-minute scramble. In this guide, we’ll cover some key strategies to help you prepare for tax season year-round, and how Lindy Parker, CPA can assist in making the process even smoother.

1. Keep Your Financial Records Organized

One of the best things you can do to prepare for tax season is to keep track of your financial documents throughout the year. This includes:

• Income Statements: Collect all W-2s, 1099s, and other income-related forms.

• Expense Records: Save receipts and invoices for deductible expenses, especially if you run a business or work as a freelancer.

• Investment Documents: Keep track of 1099-INT, 1099-DIV, and other forms related to investment income or capital gains.

  
  

It is especially useful to know which of these documents you should expect to receive in January and February, so you can know when you've received them all. Use a filing system—whether digital or physical—that categorizes these documents by type, so everything is easy to access when it's time to file. For business owners, staying on top of bookkeeping makes it simpler to report your financials accurately.

If you own a business, Lindy Parker, CPA offers bookkeeping services to help you maintain clean records, saving you time and stress when tax season arrives.

2. Estimate and Pay Quarterly Taxes

If you're self-employed or have income that isn't subject to withholding (such as rental income, freelance work, or investments), you may need to pay estimated taxes throughout the year. The IRS requires quarterly tax payments to avoid penalties. Here’s how you can stay on top of them:

• Estimate Your Tax Liability: Calculate your expected income and apply the appropriate tax rates.

• Track Your Payments: Keep records of each quarterly payment made, so they’re accounted for when you file your annual return.

• Adjust as Needed: As your income fluctuates, adjust your estimated tax payments to avoid underpayment penalties or overpaying.

  
  

At Lindy Parker, CPA, we help self-employed individuals and business owners estimate their quarterly taxes and stay compliant, ensuring you're on track to meet your tax obligations without surprises.

3. Maximize Retirement Contributions

Contributing to a retirement account not only helps you save for the future, but it also provides tax advantages. Retirement contributions can reduce your taxable income, and certain accounts, like Traditional IRAs and 401(k)s, offer immediate tax savings.

Consider increasing your contributions throughout the year, especially if you're approaching the maximum allowable limit. For 2024, you can contribute up to:

• $7,000 to a Traditional or Roth IRA ($8,000 for those 50 and older)

• $23,000 to a 401(k) ($30,500 for those 50 and older)

At Lindy Parker, CPA we can help you understand how retirement contributions impact your tax liability and plan accordingly.

4. Track and Categorize Deductions and Credits

Throughout the year, keep track of potential deductions and credits you qualify for. This could include:

• Charitable Donations: Keep receipts and documentation for any cash or non-cash contributions.

• Medical Expenses: If your medical costs exceed 7.5% of your AGI, they may be deductible. Keep receipts for medical visits, prescriptions, and other medical expenses.

• Home Office Expenses: For freelancers and remote workers, certain home office expenses may qualify as deductions. Receipts you may need to keep include rent, utilities, internet bills, and/or your end-of-year mortgage statement.

  
  

Tracking these throughout the year ensures you don’t miss out on any valuable tax breaks. Lindy Parker, CPA can help you identify which deductions and credits you’re eligible for, maximizing your tax savings.

5. Review Your Withholdings

If you're an employee, it’s important to review your tax withholdings periodically to make sure enough tax is being taken out of your paycheck. This is especially important if you've experienced changes like:

• A new job or a raise

• Marriage or divorce

• A new child or dependent

  
  

You can adjust your withholdings by filling out a new W-4 form with your employer. Properly adjusting your withholdings throughout the year ensures you won’t owe a large tax bill or get a massive refund (which means you've been overpaying).

At Lindy Parker, CPA, we can help you review your withholdings and make recommendations to better match your current situation.

6. Stay Informed About Tax Law Changes

Tax laws are constantly changing, and new rules can impact your filing. It’s important to stay informed about any major changes, such as updates to tax brackets, retirement contribution limits, or the introduction of new deductions and credits.

Rather than trying to keep track of these updates on your own, Lindy Parker, CPA stays current on all tax law changes and informs clients about adjustments that could affect them. We provide personalized advice to ensure you’re making the most of new opportunities.

7. Meet with a Tax Professional Early

The earlier you meet with a tax professional, the better prepared you’ll be. A mid-year check-in can help you assess your current situation and make necessary adjustments before tax season. For example, you may want to:

• Increase retirement contributions

• Adjust your withholdings

• Plan for major expenses that may be deductible

Lindy Parker, CPA offers year-round tax consulting services, so you can meet with us anytime to discuss your tax strategy and avoid the last-minute rush.

By preparing for tax season throughout the year, you’ll save time and reduce stress when it’s time to file. Staying organized, tracking deductions, and planning for quarterly payments are all key steps to staying ahead. And if you’re ever unsure, Lindy Parker, CPA is here to guide you through each stage of the tax process, offering personalized tax preparation and consulting services to make filing your taxes a breeze.