How to Prepare for Tax Season 2024

Key Takeaways

• Understand your filing status - This determines your tax rates, standard deduction, and eligibility for certain credits and deductions.
• Gather all your tax documents - Having all your forms like W-2s, 1099s, and 1098s in one place makes filing easier.
• Decide whether to DIY or use a tax preparer - Doing your own taxes can save money but may be complex. Using a preparer provides expertise.
• Max out retirement contributions - You can contribute to IRAs until the tax deadline to lower your taxable income.
• Adjust your withholding - Use the IRS estimator to check if you're withholding the right amount from your paycheck for your situation.

This year's tax filing deadline is April 15, 2024, but it's a good idea to start getting ready for tax season as soon as possible.¹

If you earned income in 2023, you'll need to file a federal tax return and most likely a state tax return, depending on where you live. If you don't know where to begin, the list below can help you understand how to prepare for tax season and assemble everything you need to file on time.

Here are seven key ways to begin preparing for the upcoming tax season.

1. Understand Your Filing Status

The IRS has five main filing statuses that all taxpayers fall under:²

• Single
• Head of household
• Married filing jointly
• Married filing separately
• Qualifying widow/widower with dependent child

Depending on your filing status, you may have different tax filing requirements and qualify for certain deductions and credits.³ For example, the IRS will allow a standard deduction of $27,700 for married couples who file jointly for the 2023 tax year.⁴

For single filers and married couples who file separately, the standard deduction allowed is $13,850. If you're unsure of your filing status, the IRS has a helpful tool that can help you figure out your best option. Simply answer a series of questions, and you'll be shown the filing status that aligns with your situation.

2. Make Sure Your Name & Address Are Updated

This may sound obvious, but it can be easy to overlook. If you've recently moved, gotten married or divorced, or changed your name, it's a good idea to ensure this information is updated with the IRS and the Social Security Administration.

If you've legally changed your name, contact your local Social Security office.⁵ You'll need to provide proof of identity, such as a government-issued ID, life insurance policy or marriage license. You can call the IRS to update your address information, fill out a change-of-address form and mail it in, or provide your new address when you file your return.⁶ Just keep in mind that if you wait to do this until you file your return, you may miss important communications from the IRS before then.

3. Organize Your Tax Documents

Once you understand your filing status, gather all the necessary documents you'll need to file your return. These are some common ones:

• A copy of last year's tax return: This can help you understand what deductions and credits you took last year and remind you about any information you may need to file your 2023 tax return.
• W-2 forms: A W-2 details the income you received from your job during the most recent tax year. If you were employed full- or part-time during the year, your employer typically will send this form by the end of January.
• 1099 forms: If you were self-employed, your clients will send you individual 1099 forms that detail how much you were paid. If you haven't paid quarterly estimated taxes on your self-employment income during the year, you'll have to do so once you file your return in April.
• Form 1098: If you're a homeowner, this form will include information about the amount of mortgage interest you've paid during the year.
• Form 1099-DIV: Form 1099-DIV reports any income you've received from dividends or distributions related to your investments. If you own stocks, bonds, a rental property or another type of investment that has generated a profit, you should expect to receive this form.
• Form 1098-E: This form is a student loan interest statement and will include information on the amount of student loan interest you paid throughout the year. You could be eligible for a deduction of up to $2,500 on the interest you paid, depending on your income.⁷

• Form 5498: This form details the amount you've contributed throughout the year to an individual retirement account (IRA). The bank or brokerage firm that holds your account will send you Form 5498 at the end of the tax year or the following January. The amount you've contributed may be tax-deductible as long as your income doesn't exceed the limit set by the IRS.⁸
• Form 1095-A: Form 1095-A is the Health Insurance Marketplace statement.⁹ It includes information that allows individuals who enrolled in a qualified health plan during the year to either get the premium tax credit to offset their healthcare costs or reconcile the credit on their returns with any advance payments they've received.
• Letter 6419: This letter details the total amount of advanced child tax credits an individual or couple received so they can accurately claim the remaining credit on their tax return.¹⁰ You can only claim this credit if you have a child or dependent under the age of 17.
• Information on business expenses: If you're self-employed or own a small business, you should keep receipts and credit card statements to accurately track your expenses. If you use bookkeeping software that is linked to your account, you can easily export this information and use it to file your return. Otherwise, download your monthly business credit card statements or create a spreadsheet where you list all your annual business expenses. Keeping detailed records throughout the year can help you maximize your business deductions and potentially reduce your tax liability.

While this list isn't exhaustive, it's a good starting point to get organized for tax season and help you decide whether it's feasible to file your own taxes or better to work with a tax professional.

4. Decide Whether You'll DIY or Use a Tax Preparer

As you figure out how to prepare for tax season, you'll also need to decide whether you'll file your taxes yourself or use an accounting professional or tax preparer.

The more complicated your tax situation, the better it may be to have an experienced tax professional handle your return. If you own a business and have to file both personal and business tax returns, an accountant can help ensure all the information is accurate and filed appropriately with the IRS.

However, if your tax situation is pretty straightforward — for example, if you're a single filer who works a W-2 job and doesn't yet own a home or have dependents — it may be easier and less expensive to use tax filing software. Many of these products are good at guiding everyday tax filers through the process, and in some cases, you may be able to pay an additional small fee to have a tax preparer affiliated with the company review your return before it's filed.

5. Max Out Your IRA Contributions

If you have an IRA, it's wise to contribute as much as possible before the filing deadline in April. The IRS will allow individuals younger than age 50 to contribute up to $7,000 for the 2023 tax year. Those 50 and older can contribute up to $8,000, which includes a $1,000 catch-up contribution.

If you haven't yet increased or maxed out your contributions, the good news is that you can make IRA contributions until April 15, 2024.

6. Consider Filing an Extension

Tax season is a busy time of year. It may be February or even March, and you still could be waiting for important tax documents that either got lost in the mail or were never sent.

To give yourself a buffer, consider filing an extension and requesting an automatic extra six months, which will allow you to file your return in October. To do this, you'll need to complete IRS Form 4868 or ask your tax preparer to do this for you. Requesting an extension is free, but if you owe taxes, interest will continue to accrue and penalties may apply.

Even if you're pretty sure you won't owe anything when you file your return, an extension can allow you to collect all the necessary documents, take more time to file, ensure everything is accurate and avoid penalties for failing to file on time.

7. Adjust Your Withholding

Lastly, it's also a good idea to check your W-4 withholding. If you work a traditional W-2 job, your employer will ask you to fill out a W-4 form every January that determines how much tax to withhold from your paycheck based on your tax status, the number of dependents you claim and other adjustments, such as additional nonemployment income and deductions.

If you received a larger refund after filing your return last year but your tax situation largely remained the same, it may indicate that you're withholding too much from your paycheck. If you ended up owing taxes, it may indicate you're not withholding enough.

If you're unsure, you can use this IRS tax withholding estimator to determine how much you need to withhold.¹¹ From there, consider contacting your HR department to adjust your withholding for this tax year so you don't run into the same issue when you file your 2023 return.

Getting Ready for Tax Season & Filing Your 2023 Return

Between assembling documents, understanding your filing status and finding an accountant, preparing for tax season can require a lot of time and effort. However, this process doesn't have to be so stressful if you plan ahead.

Now is as good a time as any to get ready for tax season. Consider setting aside some time at the end of your workday or during the weekend to prepare everything you need, and you might not have to rush to meet the April tax filing deadline.

Sources

1. Topic No. 301, When, How, and Where to File. https://www.irs.gov/taxtopics/tc301.
2. Module 5: Filing Status. https://apps.irs.gov/app/understandingTaxes/teacher/hows_mod05.jsp.
3. What Is My Filing Status? https://www.irs.gov/help/ita/what-is-my-filing-status.
4. IRS provides tax inflation adjustments for tax year 2023. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023
5. How do I change or correct my name on my Social Security number card? https://faq.ssa.gov/en-us/Topic/article/KA-01981.
6. Address Changes. https://www.irs.gov/faqs/irs-procedures/address-changes
7. Topic No. 456 Student Loan Interest Deduction. https://www.irs.gov/taxtopics/tc456.
8. Retirement Topics - IRA Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits.
9. About Form 1095-A, Health Insurance Marketplace Statement. https://www.irs.gov/forms-pubs/about-form-1095-a.
10. IRS revises the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions. https://www.irs.gov/newsroom/irs-revises-2021-child-tax-credit-and-advance-child-tax-credit-frequently-asked-questions.
11. Tax Withholding Estimator. https://www.irs.gov/individuals/tax-withholding-estimator