Tax Tips

Taxes Done? 5 Ways to Prep for Next Year

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Whether you received a nice tax refund or owe money, the last thing you probably want to do is think about preparing for next year’s taxes.

But just think, spending a few minutes today could save you hours (and help maximize your refund) when you sit down to file next year.

Here are five ways to set yourself up for smooth tax filing next spring.

Make a checklist

Remember the alphabet soup of documents that arrived in your mailbox starting in January?  If you needed a document to complete your tax return this year, you’ll probably need it again next year. Make a checklist to prevent the agonizing realization that you left out a 1099 and have to file an amended return—just when you thought you were done.

To get you started, here’s a short list of documents:

  • W-2, for income from your employer
  • 1099s, including 1099-INT (interest), 1099-DIV (dividends), 1099-K (electronic payments), and 1099-MISC (self-employment income). And others! 1099s are like boy bands; there’s a new style every year
  • College tuition statements (1098-T) for getting the Lifetime Learning Credit or American Opportunity Credit
  • Form 1095-A, B, or C – New Affordable Care Act Forms for reporting health insurance
  • Student loan interest statement (1098-E) for deducting student loan interest
  • Receipts from charitable donations, if you itemize
  • Any other papers you needed this year

Make a folder

Start your 2015 tax year folder now and begin filing documents like receipts, deductible expenses and donations. Whatever you do, don’t mix documents for two different tax years in the same folder. I’ve been there, and it isn’t pretty.

At the same time, create an online document in Evernote, Google Docs, or your favorite online tool, to collect electronic receipts and other vital virtual info. Sorting the data into categories at the end of the year will be easy if it’s all in one place.

Check your W-4

If you got a substantial refund this year (or, worse, had a substantial bill), adjust the allowances on your W-4. Despite what many people think, the number you write down in box 5 on your W-2 has almost nothing to do with the number of people in your family. This W-4 Withholding Calculator makes it easy to estimate your paycheck withholdings.

Prepare for childcare

If you use a childcare provider, whether an individual or a daycare or day camp, you can take advantage of the Child and Dependent Care Credit. In order to do so, however, you’ll need the provider’s tax ID—either their social security number or nine-digit employer ID number (EIN). A company is likely to have the number on their website; for an individual, you’ll need to request it using form W-9.

Set up quarterlies

This one applies to business owners who have to pay quarterly taxes. In the days of eBay, Etsy, and Kickstarter, however, that’s a whole lot of us. TurboTax, for example, can help you know what your estimated payments should be for this year to avoid a penalty.

There’s an easy way to make quarterly payments without having to lick an envelope.  Sign up for a free account at EFTPS.gov and set up your quarterly payments to come out of any bank account (well, any bank account you own; not Donald Trump’s bank account), automatically, right now.

Now, a peek into your future. Next year, instead of looking for 1099s under the couch, you’ll have everything checked off, filed, and ready to go. Instead of filing at the last minute, you and your refund can take off for spring break.