Taxes are an unpleasant fact of life for most people, but planning ahead can make the task a little easier. I spoke to tax pros and other financial experts to put together a definitive checklist of everything you should do now to be ready when tax day rolls around — and to get the biggest return possible when you file.
Last updated: Mar. 18, 2021
Take a Look at Last Year’s Return
“Use this month to locate your tax information from the previous year,” said Gisele Goes of Chime.
“Your prior year return will give you some insight as to the information you will need to assemble,” said Colleen Carcone, wealth planning specialist at TIAA. “Review your sources of income, deductions and expenses so that you know what you will have to track down for this year.”
Take Stock of What Has Changed Since Last Year’s Filing
Carcone recommends reflecting on the following questions: “Did you change jobs? Get married? Have a child? Did you change banks or investment providers? Refinance a mortgage?”
These changes will affect your taxes.
“Review your list of expenses and deductions and take stock of what may have changed over the past year that will influence which information you need to pull together,” she said.
Make Sure Your ITIN Has Not Expired
“If you file using a tax identification number (ITIN), double-check that it hasn’t expired,” said Leslie H. Tayne, founder and head attorney at debt solutions law firm Tayne Law Group. “Renewing can be done using the W-7 form but the process can take some time, so it’s best to check as early as possible so you’re not in danger of filing late.”
If You’re a Business Owner, Prepare the Paperwork Your Employees Will Need
“As a business owner with employees and freelancers, it’s important to ensure I have all the tax paperwork completed that they need to do their own taxes,” said serial entrepreneur John Rampton. “That means getting those 1099s done and mailed to my team. I prefer the new technology that enables me to send these digitally, saving time for everyone.”
Determine Which Business Tax Deductions and Credits You Could Qualify For
“Some tax credits you might qualify for include small employer health insurance and disabled access,” said Ben Gold, president of QuickBridge, a small business alternative lender. “Expenses you might be able to deduct include a home office, travel and vehicles used for business. Make sure you have the records to back up your claim and that you also understand the IRS’s rules and requirements around reporting these items.”
If You’re a Freelancer, Ensure Your Employer Has Your Accurate Contact Information
“Make sure your clients have your up-to-date contact details, particularly your address, so you can receive your 1099s in time,” said Miron Lulic, founder and CEO of SuperMoney.
Tax Checklist: See the 5 IRS Tax Forms You’ll Need To Get Your Refund
If You Were 70 1/2 in 2019, Take Your Required Minimum Distribution
“If you were 70.5 years old in 2019, you must take a Required Minimum Distribution from all of your combined retirement plans, which includes IRA, 401(k) plans, SEP, IRA and others,” said Peter J. Greco, CPA, founder and chief tax strategist at the CSI Group, LLP. “The first payments to you need to come out by April 1, 2020.”
This does not apply if you turned 70 1/2 after Jan. 1, 2020.
“Under a new law, you now won’t be required to take an RMD for 2020,” Greco said.
Make a List of All Your Sources of Income
Your income sources can include self-employment, unemployment, retirement or a typical W-2 form.
“There are many areas to consider, and now is the perfect time to make a list of all revenue sources,” said Heather Watts, senior vice president and general manager of H&R Block’s DIY Tax business. “Account for rental income, savings, and investments or dividends, as well as other gains and losses: gambling income, hobby/side hustle revenue, trusts, prizes and even alimony.”
Freelancers Should Also Account for Income Not Reported on 1099 Forms
“Taxpayers should remember to account for any taxable income for which 1099s are not generated,” said Judith Corprew, executive vice president at Patriot Bank, N.A., in Stamford, Connecticut. “For example, if you earned less than $600 for freelance work for a particular company, the company isn’t required to send you a 1099 form. Instead, taxpayers must report that income on their own.”
Gather and Organize All the Necessary Documents
“The best way to get a good start on your taxes is organizing your documents,” said Kathy Pickering, chief tax officer at H&R Block. “Having all your tax-related documents is critical for filing an accurate tax refund. Missing tax documents can lead to missing out on tax benefits you are entitled to claim.”
The documents you will need will depend on your specific situation — if you have dependents, if you are self-employed, etc.
“You can create your own personalized tax document checklist at hrblock.com/checklist so you don’t miss anything,” Pickering said.
Joe Martin, vice president of marketing at CloudApp, recommends gathering all your documents in one central place.
“I like to use a simple folder to collect everything, so I am ready for filing day,” he said.
If you receive tax forms electronically, keep an “electronic folder where you can store any emails or other electronic information that you might need,” Watts said.
Gather All Personal Information for Everyone Listed on Your Return
“You can get a head start on the process by collecting other info you will need but won’t find in a report,” Pickering said. “For example, you’ll need the Social Security numbers and birthdates of everyone listed on the return.”
Gather Receipts for Anything You Plan To Deduct
“Make sure you have collected all your expenses and receipts to ensure you account for every possible deduction if you itemize on your taxes,” said Steve Gickling, founder and CEO of ETLRobot. “All these little items quickly add up and help reduce taxable income.”
Don’t Forget About Charitable Contributions and Medical Expenses
“Keep receipts in hand for tax-deductible charitable donations and medical expenses when you file your taxes — these expenses may help you get a larger tax refund,” said Lisa Greene-Lewis, a CPA with TurboTax.
Take Note of New Extenders
“Extenders are back and were passed over the holidays,” said Greene-Lewis. “Some of the extenders that passed are the Tuition and Fees deduction up to $4,000, mortgage debt relief up to $2 million dollars, the extension of the lower medical expense threshold of 7.5%, energy-efficient credits and tax relief for disaster victims.”
Contribute To Retirement Accounts To Lower Your Taxable Income
“There is still time to make contributions to some retirement accounts and have these still count toward the taxable year,” said Yenn Lei, head of engineering at Calendar.
You can contribute funds to a traditional IRA all the way until the tax filing deadline — April 15, 2020 — to lower your income for the 2019 tax year if you want to qualify for a lower tax bracket.
“Now is the time to make those contributions and lower your taxable income while also saving for the future,” Lei said.
Contribute To Other Accounts That Can Lower Your Taxable Income
In addition to traditional IRAs, “you also still have time to contribute to your [other] tax-advantaged accounts, such Health Savings Accounts, solo 401(k) [plans] and Simplified Employee Pensions,” Lulic said. “You can contribute to them and enjoy the tax benefits they offer right up to April 15, 2020.”
Invest In Accounting Software
Jon Bradshaw, president of Appointment, said that having accounting software helps facilitate the tax preparation task.
“Make sure the software links to your bank account and business credit cards so you can download all the financial data and speed the process up,” he said.
Or Hire a Tax Professional
If you prefer to have a professional do your taxes, now is the time to hire someone to serve as your tax advisor and preparer.
“Sit down with a tax advisor who has read the entire new tax bill, and go over a strategy for implementing the incentives provided in the bill,” said Tom Wheelwright, CPA, CEO of WealthAbility. “A good tax preparer will significantly reduce your chances — and potential cost — of an IRS audit.”
Review All of Your Tax Forms Carefully and Thoroughly
Getting a head start on preparing your taxes gives you extra time to double-check that everything is done correctly.
“Don’t simply rely on an online program or even your accountant to ensure that your return is 100% correct,” Tayne said. “Take your time to check over all your information and read through each prompt carefully. Filing incorrectly can result in overpaying, missing a deduction or making a costly mistake.”
See if You Qualify To File Electronically for Free
“Taxpayers who make $69,000 or less each year can use Free File products through the IRS,” Tayne said. “For state filing, consult your state’s website to see if you qualify.”
Consider Filing Your Taxes Early
The IRS opened the 2020 tax filing season for individual filers on Jan. 27.
“If you have everything you need to file, there’s no reason to wait,” Pickering said. “Filing early can help protect your tax identity from being stolen and your refund delayed. If your Social Security number is stolen and used to file a fraudulent return, your tax refund could be delayed as much as six months or longer. “
Take Other Precautions To Protect Your Identity
In addition to filing taxes early, Paige Schaffer, CEO of Global Cyber & Identity Protection Services at Generali Global Assistance, encourages people to sign up for scam alerts from the Federal Trade Commission so they are aware of all the tricks identity thieves are currently employing.
“Identity thieves can pose as your employer, payroll companies or even the IRS itself, often making requests that seem unnecessarily urgent, threaten penalties and direct you to provide sensitive information or download an attachment that contains malicious software,” she said. “You should never provide any personal information over the phone to someone who says they are from the IRS. The IRS will never contact you via phone, email or social media.”
Apply For an Extension If You Think You Will Need It
“If you don’t think you’ll be able to get everything in order by the deadline, file an extension,” said Paul Miller, CPA and founder of Miller & Company, LLP. “While April 15, 2020, is Tax Day, when you do have to pay the taxes you owe or pay penalties, an extension allows you to breathe easier because it can give you up to six more months to tackle your tax prep. And if you get an extension, don’t wait until the last minute to get to it.”
Decide What You Will Do With Your Tax Refund
“Evaluate what your tax refund might be and then identify what types of purchases you can make once the refund comes,” said Brian Burke, founder of SellYourMac. “These purchases may be for your business or personal life, resulting in further tax deductions for the new year.”
Whether you want to buy a new computer, put the money in an emergency fund, pay down debt or take a vacation, planning what to do with your refund now will prevent you from making impulse purchases when you actually get it.
Reflect On How You Made and Spent Money Over the Past Year
“Tax season is an ideal time to reflect on your revenue for the year and how you spent it,” said Stephen Dalby, founder and CEO of Gabb Wireless. “You can prepare the numbers for your taxes, but you can also determine if you can improve your income in the coming year as well as change your budget to reflect financial goals for saving more money in 2020.”
Make a Checklist for Next Year
“While you are completing this year’s taxes, make a checklist of all the information that you needed so that you can quickly assemble it next year,” Watts said. “Take a few minutes to check in regularly throughout the year so that you are not tasked with digging through mountains of paper or emails next year when you are sitting down to do your taxes.”
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Gabrielle Olya contributed to the reporting for this article.