As the new year begins, so does the countdown to the annual tax season. January is an ideal time to start preparing for your taxes to ensure a smooth and stress-free experience. In this blog post, we’ll outline key tax-related tasks that individuals should address in January, from gathering necessary documents to staying informed about tax law changes. By taking early steps, you can make the tax-filing process more manageable and potentially maximize your refund or minimize your tax liability.

Gather Your Tax Documents:

• Income Statements (W-2s, 1099s): Start by collecting your W-2 forms from your employer, which detail your wages, taxes withheld, and other compensation. Additionally, gather any 1099 forms if you received income from sources like freelance work or investments.
• Bank and Investment Statements: Collect statements from your bank accounts, investment accounts, and brokerage accounts, as these will provide important information for reporting interest, dividends, and capital gains.
• Mortgage and Loan Statements: If you have a mortgage or outstanding loans, gather the annual interest statements, which can be used for potential deductions.
• Charitable Contribution Records: Ensure you have records of any charitable donations made during the year. This may include receipts from charitable organizations, canceled checks, or acknowledgment letters.

Stay Informed About Tax Law Changes:

• Understand Tax Law Changes: Stay informed about any changes to tax laws or regulations that may affect your tax return. Tax laws can change from year to year, impacting deductions, credits, and tax rates.

Review Your Filing Status and Withholding:

• Review Your Filing Status: Confirm your filing status (e.g., single, married, head of household) to ensure you’re selecting the most advantageous option for your situation.
• Check Your Withholding: Review your Form W-4 with your employer to ensure your withholding is accurate. Adjust your withholding if necessary to avoid overpaying or underpaying taxes throughout the year.

Organize Tax-Related Expenses:

• Organize Deductible Expenses: Collect receipts and documentation for deductible expenses such as medical expenses, education costs, job-related expenses, and home office expenses, if applicable.

Plan for Tax Credits:

• Investigate Tax Credits: Research tax credits for which you may qualify, such as the Earned Income Tax Credit (EITC), Child Tax Credit, or education-related credits. These can help reduce your tax liability.

Consider Filing Options:

• Choose How to File: Decide whether you’ll file your taxes independently, seek the help of a tax professional, or use tax software to file online. Each option has its advantages, so choose the one that aligns with your comfort level and financial situation.

Conclusion: Getting a head start on your tax preparations in January can make the tax season less stressful and more financially rewarding. By gathering your tax documents, staying informed about tax law changes, and taking proactive steps, you’ll be well-prepared for the upcoming tax season. Keep in mind that early preparation can help you avoid the last-minute rush and potentially lead to a smoother tax-filing experience. So, invest a little time now, and reap the rewards during tax season.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Dan W. Nowell Wealth Management and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.