The 2016 tax season has finally come to a conclusion. While you may be done with your federal income tax duties for this year, there are several items you should add to your to-do list so that you can take advantage of this time before next year’s tax season arrives.
1. File your tax return(s) if you got an extension.
If you filed for an extension of time with the IRS, consider getting your return(s) prepared and filed sooner than later. You likely have until Monday, October 17 to file your return(s), but what are you waiting for? Get it done and behind you. If you procrastinate, you might forget about it and miss the deadline in 6 months. That will just add to your stress with a potential late-filing penalty.
2. Spend your refund wisely if you receive one.
Did you overpay your taxes this year? If so, you should be getting a tax refund check in the mail—or deposited directly into your bank account. According to the IRS, roughly 75% of U.S. taxpayers receive a tax refund after filing their returns. The average tax refund is about $2,800. While this amount isn’t exactly life-changing money, it is still enough to make an impact on your finances. So, spend it wisely. Perhaps you’ve been looking for startup capital to launch a marketing firm or coffee shop. Maybe you’re in desperate need of a tropical vacation to Jamaica. Or, you might think it’s time to open a Roth IRA for savings purposes. No matter what you do with this money, be smart about where it winds up.
3. Review your current financial situation.
When filing your taxes with the IRS, state, and local tax authorities, your resulting refund—or lack thereof—is a good indication about your current financial situation. It can tell you how much you’re making, how much you’re spending in taxes, how this financial information compares to previous tax years, and so much more. Perhaps you could claim more tax deductions and tax credits in the future to reduce your tax liability. If you live in a state like California where you could face a state income tax of up to 12.3%, you might seriously consider relocating to a nearby state like Nevada where there is no income tax.
4. Start preparing for your next tax deadline(s).
Obviously, the next big IRS tax-filing deadline for individuals to pay income taxes comes around next April. But that doesn’t mean there aren’t other tax deadlines to know about. An estimated tax deadline for self-employed taxpayers is right around the corner on June 15. There is another one in September as well. Plus, payroll taxes are often due throughout the year, and there are other tax deadlines for small business owners and 1099 independent contractors to mark on their calendars. Finally, it’s never too late to prepare for next year’s tax season by starting fresh with a new way to keep your financial records organized and easily accessible when you need them most. Consider scanning documents to save on your password-protected PC or using handy mobile apps for convenient recordkeeping.
5. Consider how you’ll do your taxes next year.
Examine how the filing process took place for you this year. Did you submit your return yourself? Were you stressed about filling out the return and ensuring you claimed every tax break for which you qualify? Did you have to get an extension? If you encountered any challenges with the filing process, you might want to use an accounting professional to handle your taxes next year. You can save both time and money by doing so.
What You Need to Know About Covid-19 Tax Relief
9 Top Tax-Saving Strategies for Your Business
Don’t Miss Out on These 6 Tax Deductions for Solopreneurs