As soon as the calendar flips into a new year, tax season shifts into high gear. It can be an intense time: W-2s, 1099s, deductions, tax credits—all of these terms might make your head spin. But take heart! At Halter Ferguson Financial, we believe that a little preparation goes a long way in not only reducing stress but also in making the most of potential tax savings. In this post, we’ll discuss some practical strategies to help you stay organized, leverage available benefits, and position your finances for a successful year.
1. Get Organized Early
The old adage “an ounce of prevention is worth a pound of cure” couldn’t be more relevant during tax season. Even if you have a tax professional lined up or use a reliable tax software, gathering your documents early makes a world of difference. Here are a few suggestions to help you stay on track:
Create a centralized location for documents: Whether it’s a physical folder or a secure digital platform, make sure you keep your W-2s, 1099s, interest statements, and relevant receipts in one place.
Review last year’s return: Last year’s tax return can be a helpful guide. Look at the forms you used previously to ensure you’re not missing anything this year.
Set reminders: If you have multiple sources of income or a busy schedule, simple calendar alerts can help you stay on top of key filing deadlines.
2. Maximize Retirement Contributions
Tax season is an excellent time to revisit your retirement savings strategy. Contributing to tax-advantaged retirement accounts not only helps you build a nest egg for your future but can also help lower your taxable income. Here are a few accounts to consider:
401(k): If your employer offers a 401(k) plan with a match, ensure you’re contributing enough to take full advantage of the match. Free money is hard to beat!
Traditional IRA: Contributions may be tax-deductible, depending on your income level and filing status. This can reduce your taxable income for the year.
Roth IRA: While contributions aren’t tax-deductible, qualified withdrawals in retirement are tax-free. A Roth IRA can be a powerful tool if you anticipate higher taxes in the future.
If you haven’t made the maximum contribution to your IRA or Roth IRA, remember that you typically have until the tax filing deadline to add funds for the previous year—just be sure to flag it as a prior-year contribution if applicable.
3. Don’t Overlook Tax Credits and Deductions
While deductions reduce your taxable income, tax credits directly reduce the amount of tax you owe. Both can significantly impact your final tax bill if you qualify. Some examples include:
Child Tax Credit: If you have eligible children, you may qualify for this credit, which can help offset the cost of raising a family.
Education Credits: The American Opportunity and Lifetime Learning Credits can offer tax relief if you or a dependent is paying college tuition.
State and Local Credits: Depending on where you live, there may be additional credits or deductions for things like home energy upgrades or property taxes. Don’t forget to look into these local incentives.
It’s easy to miss out on credits and deductions if you’re not aware of them. This is where professional guidance can really shine—making sure you’re leveraging all available benefits.
4. Consider Timing for Income and Expenses
For small business owners, freelancers, or those with variable income, strategic timing can make a difference in your tax liability. Here are some steps you might take:
Accelerate or defer income: If you have the flexibility, you may want to receive income before the end of the year (to manage a potentially higher tax bracket down the road) or push it into the next year (to reduce your current tax liability).
Bunch deductions: If you can time certain expenses such as medical procedures or charitable giving, you might exceed the standard deduction in one year and then take the standard deduction the next year, effectively maximizing your savings over two years.
5. Seek Professional Guidance
There’s a lot at stake during tax season, and it’s easy to feel overwhelmed by the complexity of the U.S. tax code. A professional tax preparer or financial planner can offer peace of mind by:
Reviewing your tax returns for overlooked credits, deductions, or errors.
Providing personalized advice on structuring your financial life for long-term growth and stability.
Helping you create a comprehensive financial plan that addresses not only taxes but also retirement, investment strategies, and estate planning.
At Halter Ferguson Financial, we work closely with our clients to coordinate tax planning within the broader scope of personal finances. After all, your tax return is just one piece of the puzzle. Our goal is to ensure every aspect of your financial plan—from monthly budgeting to long-term investment strategies—supports the life you envision for yourself and your family.
Looking Beyond Tax Season
Once tax season is in the rearview mirror, take a moment to reflect on any lessons learned. Did you find yourself scrambling at the last minute for receipts or missing 1099s? Did you realize your retirement contributions fell short of your goals? Use tax season as an annual checkpoint to refine your financial habits and adjust your plans. Develop a year-round approach to organization, saving, and investing. Even small steps taken consistently can lead to significant financial gains over time.
In Closing
Tax season doesn’t have to be a whirlwind of last-minute paperwork and guesswork. By organizing your documents, maximizing retirement contributions, leveraging credits and deductions, and getting professional support when needed, you can turn this annual chore into a meaningful opportunity for financial growth.
If you have any questions about your financial plan or need guidance with strategies that align with your specific circumstances, reach out to our team at Halter Ferguson Financial. We’re here to help you navigate every stage of your financial journey with clarity and confidence.
Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult with a qualified professional to discuss your unique financial situation.