5. Start organizing your finances as soon as possible
Tax preparation can be nerve-wracking even if you don’t have to look up information or hunt down paperwork on a tight deadline. That’s why the process of organizing your finances for your subsequent filing should start as soon as the tax season begins.
Financial experts recommend making a habit of keeping all tax-related documents during the year. For instance, if you make a charitable contribution, make sure you save a copy of the payment. Whether it’s a credit card statement or a check, retain all important documents, including the contemporaneous written acknowledgment that supports the donation.
Other examples of items you should save include payments for childcare costs, receipts for deductible business expenses, real estate taxes, information regarding all cryptocurrency and foreign transactions, and documents related to the sale of capital assets like stock or real property.
A good piece of advice is to make a checklist of all the documents you needed to prepare this year’s tax return and use it as a general guide for next year.
