Tax season is upon us, and if you’re like many Americans, you might be feeling that familiar mix of dread and determination.
But here’s the truth: with some smart preparation and organization, you can face this tax season with confidence. Let’s break down exactly what you need to do to get your financial house in order before filing your 2024 taxes.
Start Early, Start Strong
The Internal Revenue Service (IRS) typically begins accepting tax returns in late January, but that doesn’t mean you should wait until then to get organized. According to the IRS, taxpayers who file early not only receive their refunds faster but are also less likely to become victims of tax-related identity theft.
“Filing your taxes early is one of the smartest financial moves you can make,” says Chime’s Chief Spending Officer Janelle Sallenave.
According to Sallenave, here’s why: First, you give yourself more time to gather your documents—W-2s, 1099s, receipts for deductions—at your own pace. Chime’s tax filing tool allows you to file directly in-app, making the process simple and fast. No need to stress about last-minute scrambling. You’ll also have ample time to double-check your work, ensuring you don’t miss out on valuable deductions. Second, filing early means you could receive your refund faster, especially if you opt for direct deposit. With Chime, you can even get your refund up to six days earlier, putting that money back into your hands sooner. Whether you’re saving or using it for everyday expenses, why wait? The sooner your refund is working for you, the better. Lastly, early filing helps safeguard against tax fraud. The sooner you file, the less chance someone else has to submit a fraudulent return in your name.
Create Your Document Command Center
Before you can file, you’ll need to gather all relevant tax documents. Remember, employers have until January 31, 2025, to send your W-2s, and most 1099s arrive by the same deadline. But don’t wait for these documents to start organizing. Here’s what you should be collecting now:
Income documentation is your foundation. This includes your W-2s, 1099s for freelance work, investment income statements, and records of any other income sources. If you’re self-employed or have a side hustle, pull together your profit and loss statements and business expense records.
Sallenave notes, “Start by organizing your income sources. Freelancers typically receive Form 1099-NEC from clients or Form 1099-K from payment platforms. Check your email or client portals for these. For any work that doesn’t come with a 1099, create your own income record—this can be as simple as a spreadsheet logging payments received.
Next, track your expenses. If you’re self-employed, this step can help you lower your taxable income. Use bank statements, receipts, or accounting apps to document business-related costs like software, equipment, or even your home office expenses.
Finally, keep all your tax-related documents—income, expenses, and deductions—in one place. Digital folders or tax preparation apps are great for this. Once everything’s organized, filing will feel less daunting. And if you’re still unsure, don’t hesitate to reach out to a tax professional for guidance.”
Also, gather receipts for charitable donations, mortgage interest statements, property tax records, and receipts for business expenses. If you’ve made energy-efficient home improvements, keep those receipts handy – they might qualify for valuable tax credits.
Embrace Digital Organization
While paper records are still valid, digital organization can make tax preparation significantly more efficient. The IRS accepts digital records, and many tax professionals prefer them. Consider using tax preparation software to track expenses year-round, or at minimum, create dedicated digital folders for scanning and storing tax-related documents as they arrive.
“Keeping a digital record of taxes is incredibly important because it helps ensure organization and easy access,” says Sallenave. “Digital files can be quickly searched, retrieved, and shared, which saves time when preparing future tax returns, responding to audits, or addressing financial questions. Maintaining these records also supports compliance by providing a clear, traceable history of financial activities, which can be crucial in the event of an audit or dispute. Additionally, digital storage reduces the risk of physical records being lost, damaged, or misplaced, while offering secure backup options through cloud services.”
Know Your Numbers
Take time to review your financial situation from 2024. Did you change jobs? Start a business? Buy a home? These life changes can significantly impact your tax situation. Pull your bank statements and credit card statements to review major purchases and life events that could affect your tax return.
Consider Professional Help
While many people successfully file their own taxes, sometimes professional help is worth the investment. The National Association of Tax Professionals reports that taxpayers who work with qualified preparers are less likely to face audits and more likely to receive all eligible deductions and credits.
Looking Ahead
Use this tax season as an opportunity to plan for the future. Review your withholdings, adjust your estimated tax payments if needed, and consider tax-advantaged investment strategies for 2025. The American Institute of CPAs recommends reviewing your tax situation quarterly to avoid surprises and maximize tax-efficient opportunities throughout the year.
Remember, staying organized isn’t just about making tax season easier – it’s about taking control of your financial future. With these preparations in place, you’ll be ready to face tax season with confidence and clarity.