Your Action Plan: Next Steps for Tax Season

Navigating taxes in retirement doesn’t have to be overwhelming. By breaking it down into manageable steps, you can approach tax season with a clear plan and a sense of control.

Step 1: Gather Your Documents

As soon as January arrives, start a folder for all incoming tax forms. The most important ones will be your SSA-1099, any 1099-R forms from pensions or IRAs, and 1099-INT/DIV forms for investments. Don’t forget records of any expenses you plan to deduct if you itemize.

Step 2: Calculate a Rough Provisional Income

Once you have your forms, use the simple formula we discussed to estimate your provisional income. Add your AGI (without Social Security), any tax-exempt interest, and one-half of your Social Security benefits. This quick calculation will immediately tell you if you are near or over the taxation thresholds.

Step 3: Review Your Withholding for the Year Ahead

Based on this year’s tax outcome, decide if you need to make changes for next year. Did you get a huge refund? You might be having too much withheld. Did you owe a large amount and face a penalty? You should consider starting or increasing your withholding using Form W-4V or making estimated payments.

Step 4: Think About Tax-Smart Strategies

Look at the bigger picture. Are there moves you can make during the year to manage your income? This could involve planning IRA withdrawals more carefully, utilizing a QCD if you are over 70½, or rebalancing your investments for better tax efficiency.

Step 5: Decide How You Will File

Will you use tax software, hire a professional, or use a free tax preparation service? Making this decision early gives you time to book an appointment or get familiar with the software you choose, reducing last-minute stress.