Tips for Better Tax Preparation and Planning for a Smoother Tax Season Next Year by Rupa Pereira, EA

Tax season can be a stressful time for many, but with the right preparation and planning, you can avoid surprises and ensure a smoother process next year. As we enter the 2nd quarter of 2024, there are several key areas to focus on to better manage your tax liability.

One important step is to adjust your paycheck withholdings by submitting a W-4 form to your employer. This is especially crucial if there have been changes in your filing status or dependents. Additionally, consider maximizing your retirement contributions in employer-sponsored plans or HSAs to reduce your gross income for the current tax year.

It’s also essential to stay within allowable contribution limits for tax-advantaged accounts such as HSAs, IRAs, and 401(k)s to avoid penalties for excess contributions. If you owed more than $1,000 on your 2023 tax return, consider making estimated tax payments to avoid underpayment penalties.

For those in higher income brackets, be mindful of moving into a different tax bracket due to changes in income thresholds. Self-employed individuals should make quarterly estimated payments, and those with foreign accounts must adhere to reporting requirements.

Extensions can be filed if needed, but consider making an estimated payment to avoid penalties. Lastly, pay attention to your adjusted gross income for 2024 as it can impact various aspects such as Medicare premiums, college financial aid, and student loan payments.

By taking these proactive steps now, you can better prepare for next year’s tax season and avoid any unexpected surprises. Stay informed and plan ahead to ensure a smoother and more manageable tax process.