5 Ways to Get a Head Start on Your 2021 Taxes

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While April is still quite a few months away, it's never too soon to start thinking about tax preparation. Whether you work part-time or full-time, have dependents, or live alone, taxes can require time and patience to do them correctly. Especially if you've had recent changes to your tax situation, you'll want to get a jumpstart on next year's taxes now.

Here are some of the small things you can do now to make filing your 2021 taxes less stressful come springtime.

5 ways to prepare for the 2021 tax season

Some of these tasks can be done quickly, while others will take more effort. Just be sure you're thinking ahead so you can get them finished well before the deadline.

1. Decide what tax solution you'll use

Whether you prepare your own taxes or seek tax advice from a professional, it pays to look around at all the options. Some filers will qualify for free tax filing, especially if they have a simple tax form and make under a certain amount. Others, like freelancers or gig workers, require more complicated returns and should look into tax solutions aimed at small business professionals.

If you're unsure what product or service best suits your needs, look for explainer pages on each tax product's website that compare the features. Sometimes, the more expensive option can actually save you money, especially if it comes with a single free electronic federal tax filing.

Pro tip: Don't forget state tax filing products! Some states, like South Dakota, don't have an income tax. If you live in a state with more complex tax laws, look for a product that has filing instructions for your state.

2. Start collecting relevant payment info

Most employers and (if you're a freelancer) clients will send you tax forms beginning around February of next year that you'll use to do your taxes. However, you don't have to wait until then to get started. Collecting past pay stubs and receipts now will make it easier to estimate your tax situation in the new year and can come in handy if there's ever a dispute between what you think you made and what your employer says you made.

3. Count every payment

So much has changed over the past two years, and law changes and special stimulus payments have people wondering what they'll need to count up at the end of the year. If you track your earnings in a budget app, go through it now to see what you've received in 2021. This will help you more accurately file and get a true number for your return. Here are some credits to pay attention to:

  • Advanced Child Tax Credit payments — Tally up what you received, not what you were supposed to receive. Remember, payments may have come to your bank account or through a check in the mail. Spouses (even those filing jointly) may have gotten their payments split into two and issued as a payment to each parent.
  • Unemployment — You should get a statement at the end of the year for state unemployment, but it's up to you to have an accurate count of what you received.
  • Stimulus payments — Keeping track of stimulus payments is important, as those who didn't get them (but should) may have the chance to claim them on taxes. Know what you got and when they hit your account.

4. Update your contact information

If you've been getting paychecks through direct deposit and work communications via email, you may not know what physical address your employer has on file for you. Now is a good time to verify this with them, updating new address information from a recent move or even updating your name if you've gotten married. Confirm that you'll be getting 2021 tax documents to your current address.

5. Mark your calendar

When can you file taxes? The date set by the IRS may or may not be the date your tax software is ready to be used. Last-minute tax regulations are also possible and can potentially push back the date the IRS will be able to accept returns. There may also be extensions to the traditional April 15, 2021 tax deadline, so watch the news or check the IRS website periodically for updates.

When can you start your taxes? Any time after December 31, 2021, you can start getting your numbers ready, even if you don't have forms yet from your bank, employer, or state unemployment office. You'll want to check the numbers you have against the forms you receive, but January 1 is the date to start getting serious about filing.

Take control of your taxes

If you aren’t sure if you are qualified to file or feel you don’t have much income, reach out to a tax professional to see what is required for filing. Many tax professionals have programs for low-income residents and can provide more information on how to get your taxes done at no extra cost to you. Searching now helps you plan your time and your dollars so that you can keep more of both come April.

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