Getting ready for tax season may sound like a chore you want to put off until the last minute. But doing so could mean mistakes that could cost you big-time.
Feeling unprepared is a normal feeling, but you may be more ready to file your taxes than you think. Here are seven signs you are already prepped and ready for tax season.
1. You Already Know What Tax Forms You’ll Receive and From Where
Filing your taxes becomes a lot easier when you know what documents you’ll get. Maybe it’s a W-2 from your full-time employer, a 1099-INT from your bank or a 1099-NEC from your side hustle.
Either way, understanding the forms you expect to have can help you keep on top of what you’ll need to file. That can lower the risk of filing without complete information, which, if you didn’t know already, is one of the most common reasons returns need corrections later.
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2. You Know What Your Income Streams Are
Knowing your income streams — your job, side hustles, gig work, investment income or rental earnings — means you’re able to accurately report what you made on your income tax return.
Not reporting your income accurately could mean unexpected tax bills or penalties.
3. You Reviewed Last Year’s Return for Carryovers
Did you know that tax deductions or credits from one tax year can be applied to another tax year?
Called carryovers, you can roll unused deductions or credits forward. These include capital losses and certain charitable deductions. Checking last year’s return for these items means that nothing valuable gets left behind and helps create a more accurate picture of what your current return may look like.
4. You’ve Been Tracking Your Deductions
Knowing what your deductions are throughout the year makes it easier for you to claim them come tax time. That means items like medical costs, charitable donations and even qualified business expenses can easily go on your tax return since you’ll have records for them.
Keeping tabs early also prevents missing any receipts that could mean you pay more taxes than necessary.
5. You Know Whether You’ll Itemize or Take the Standard Deduction
Knowing the type of deductions you’ll take makes it a lot easier, whether you file a return yourself or with the help of a tax preparer.
The standard deduction is a fixed amount set by the IRS, while itemizing involves listing eligible expenses individually. Knowing what you can deduct and an idea of which option applies means you won’t be scrambling to calculate itemized expenses that you may not use.
6. You Know Which Recent Tax Changes Actually Apply to You
Headlines about tax changes can feel misleading, especially when they apply only to certain taxpayers. That means if you know what applies to you, you can cut through the noise and focus on what you need to prepare your tax return.
7. You Adjusted Withholdings or Made Estimated Payments
Filing taxes tend to go a lot smoother when your withholding aligns more closely with your actual income. Tasks like updating a W-4, making estimated quarterly payments or setting aside money for self-employment taxes helps prevent owing large balances.
That way, you’re spreading out the taxes you own instead of receiving one big bill.
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This article originally appeared on GOBankingRates.com: 7 Signs You Are Prepped and Ready for 2025 Tax Season
