You made it through tax season and are still alive. So, you can relax now, right? Definitely give yourself some time to appreciate the fact that your taxes are done, whether that’s getting away for the weekend, taking a long vacation, or just raising a toast to a job well done.
But Maybe Don’t Take the Whole Year Off
While it can be tempting to forget about your taxes until the next tax season rolls around, it can also be a good idea to stay organized throughout the year. Being prepared will help lower any anxiety you have about next year’s tax return.
Update Your W4 Withholding Form
Right after you’ve completed your tax return is a great time to reassess how much is being withheld each paycheck for your federal and state taxes. If you owed with your tax return, you will want to tell your employer to withhold more money throughout the year so you don’t owe it at the end of the year. If you got a large refund, you may want to tell them to withhold less. The best way to do this is to update your W4 Withholding Form with your HR or payroll department.
Keep Track of Personal Itemized Deductions
While your mortgage company will send you a 1098 at the end of the year with the amount of mortgage interest that you paid, there are some personal itemized deductions that you will want to keep track of throughout the year.
- Property Taxes: Most people have two property tax bills per year—keep track of the amount of each payment as they are potential personal itemized deductions.
- Unreimbursed Medical Expenses: If you pay your own health insurance premiums and/or have a lot of medical expenses throughout the year that you pay out-of-pocket, keep those receipts and total them up at the end of the year. They do have to total 7% or more of your yearly income, but they could also be a part of itemized deductions.
- Donations: Both cash and non-cash donations can be deductions as well. Again, keep those receipts, especially if you have non-cash donations over $500—you will have to include the donee’s information on your tax return.
- Employee Expenses: The tax law changed in 2017, and the IRS no longer allows this deduction, even if you work from home. The only way to take business deductions, which are different from personal itemized deductions, is if you are self-employed and receive a 1099 to report earned income.
**Keep in mind: You are only eligible to take personal itemized deductions if they total more than the standard deduction for your filing status. If they don’t, you will have to take the standard deduction.
Self-Employed Deductions
As stated in the previous paragraph, these deductions are separate from personal itemized deductions and are reported in a different part of your personal tax return. If you receive any income reported on a 1099-NEC or 1099-K, you are considered self-employed and can take business-related deductions, such as business use of home, car mileage, advertising, supplies, and more. A convenient way to keep track of your expenses throughout the year is to use an expense tracking software.
See: The Most Common Self-Employed Expense Categories.
Quarterly Estimated Payments
Another option to make your yearly tax return process more painless, especially if you are self-employed or owe a lot at the end of the year, is to make quarterly estimated payments to the IRS and/or state tax board. These estimated payments are based on the previous year’s income and can be paid online.
Have questions after tax season is over? Contact one of the tax preparers at Moore & Paquette Tax Group. We’re happy to help!
Please note that tax laws change often, and you should always check with a tax preparer for the most up-to-date information.