How to Prepare for Tax Season In 7 Steps

how to prepare for tax season

Tax season is fast approaching, a time when many Americans experience heightened stress and concern over finances. If you find tax season stressful, you are not alone. 

Tax season is overwhelming for many people due to the complicated process of filing taxes and slogging through legal jargon — plus the worry that, if you make a mistake, the IRS could come for you. 

To help you avoid high levels of stress, this article will provide you with effective steps on how to prepare for tax season. This is a fantastic opportunity to determine the best course of action and ensure that tax season doesn’t stress you out yearly.


1. Make Sure Your Personal Information Is Updated

It’s important to provide proper information when filing taxes since even a small mistake can cause complications in the future. You want to make sure your address, first and last name, birthdate, your spouse’s birthdate, and any dependents’ Social Security numbers are up-to-date and accurate.

Although they may seem obvious, the names and addresses can be easily overlooked, especially if you’ve recently relocated, gotten married, divorced, or changed your name. It’s a good idea to make sure this information is updated with the IRS and the Social Security Administration. 

Ensure that you communicate with your Social Security office if you have officially changed your name or made changes to your personal information. You’ll need to present identification as proof of your identity, such as a passport, a life insurance policy, a marriage certificate, etc.

Calling the IRS, mailing a change-of-address form, or including your new address on your return are all options for updating your address information.

Just bear in mind that if there is a slight mistake in the information and you wait until you file your return to update your information with the IRS and Social Security office, you risk missing crucial IRS correspondence or delaying your tax return.


2. Identify Your Filing Status

Your filing status is taken into account for figuring out your required filing dates, standard deduction, eligibility for some credits, and accurate tax. Your tax filing requirements and eligibility for particular deductions and credits may vary based on your filing status.

The filing status is crucial since your marital status, the number of children you have, your work, and a variety of other criteria affect your tax bracket and, consequently, the amount you pay or receive from your return. If you don’t accurately report your status, it will be viewed as fraudulent.

According to the Internal Revenue Service (IRS), there are five tax filing statuses:

  • Single
  • Married filing jointly
  • Married filing separately
  • Head of household
  • Qualifying widow(er) with dependent child


Your filing status is particularly significant because it affects important factors in filing your income tax, such as the tax rate of your taxable income, the size of your standard deduction, and the kinds of deductions and credits that will be allowed. In addition, taxes can be reduced by selecting the appropriate filing status.

Knowing your filing status first is crucial for making the rest of your tax preparation process simpler and more efficient.


3. Organize All of Your Tax Paperwork

After you have verified your filing status and confirmed that all personal information is correct, it is time to start organizing all of your tax documents. Unsurprisingly, there are quite a few documents to keep track of during tax season.

Before you start filing, make sure you have all the necessary paperwork on hand so that you can file accurately and benefit from all the deductions for which you are eligible.

Here are some common documents and information that you need to prepare:

  • Copy of the tax return from the previous year: This can help you to understand the credits and deductions you claimed the previous year and serve as a reminder of any data you might need to submit your current tax return.
  • W-2 form(s): This form shows your most recent tax year’s revenue. Your employer will normally deliver this form by the end of January if you worked full or part-time during the year.
  • 1099 forms: You will have specific 1099 forms with payment information if you are self-employed.
  • Form 1098: If you own a property, this form will include details about how much interest you paid on your mortgage in the previous year.
  • Form 1099-DIV: This shows any income you’ve received from dividends or distributions connected to your assets. You should anticipate receiving this form if you possess stocks, bonds, rental property, or any other kinds of investments that have earned income.
  • Form 1098-E: This shows a student loan interest statement that details how much interest you paid on student loans last year.
  • Form 5498: This document provides information on the annual contribution you made to an IRA. You will receive this paperwork from the bank or brokerage company that manages your account.
  • Form 1095-A: This document is a declaration from your health insurance company. It contains details that enable those who signed up for a qualifying health plan during the year to either claim the premium tax credit to lower their medical expenses or to reconcile the credit on their tax returns with any payments they may have received.
  • Letter 6419: This explains how much in advance child tax credits a person or couple got in total so they may claim the remaining credit on their tax return. This credit is only available to those who have dependents or children under the age of 17.
  • Business expenses: Keep credit card bills and receipts if you run a small business or are self-employed so you can properly track your spending. You may export this data and utilize it to file your return. If not, obtain your monthly credit card bills for your business or compile a spreadsheet of all your annual business costs. Keeping thorough records will help you optimize your company deductions and perhaps lower your tax liability.


4. Compile All Relevant Receipts

You can choose to itemize your deductions or take the standard deduction — this choice will determine which receipts you need to submit. To determine which option will result in a larger tax deduction, sum up all of your itemized deductions and compare the total to your standard deduction.

If you want to itemize your deductions on your tax returns, you’ll need to keep track of your property tax payments, bank and credit card bills, investment or job-related fees, and receipts for charitable contributions over a specific threshold. 

Additionally, small company owners must acquire payroll records, partnership contracts, asset purchase information and receipts, depreciation schedules, personal and business banking accounts, and credit card balances.

Make a list of your income and spending that includes the following:

  • Revenue figures
  • Returns and severance pay
  • Renting offices and office supplies
  • Insurance deductible
  • Fees paid to accountants, attorneys, and others
  • Payments made for hired help
  • Transportation and lodging costs
  • Advertisement costs
  • Expenses for devices such as computers, internet service, communication devices, and phones
  • Office supplies and furnishings expenses
  • And more


Collecting and categorizing receipts all year and putting them in the proper file storage makes retrieving and compiling relevant receipts quick and easy.

Consider utilizing color-coded files, with one color representing income, one representing cost shown on bank or credit card bills, and a third representing expenses noted on other forms, such as payment receipts.


5. Maximize Tax-advantaged Accounts Before Tax Day

While the tax year concludes on December 31, there is still time until Tax Day to maximize some of your accounts and lower your taxable income. April 18, 2023, is the deadline for contributions to an IRA or an HSA. To the extent permitted by the IRS 2023 maximums, you might still be able to add more money to your accounts.


According to the required minimum distributions (RMD) of the IRS, “The SECURE Act, which became law on December 20, 2019, made a major change to the RMD rules. If you retire at the age of 70½ in 2019, the prior rules apply and you must take your first RMD by April 1, 2020. If you reach 70 ½ in 2020 you must take your first RMD by April 1st of the year after you reach 72."

"You can calculate the amount of your IRA required minimum distribution by using our Worksheets. You must calculate the required minimum distribution separately for each IRA that you own other than any Roth IRA, but you can withdraw the total amount from one or more of your non-Roth IRAs. Remember that you face a 50 percent excise tax on any required minimum distribution that you fail to take on time.”


6. Work With a Tax Professional

You can certainly handle tax season on your own, but working with a tax expert can ensure that everything is covered and you get the most out of your tax return. Consider collaborating with a knowledgeable tax professional throughout tax season if your financial position becomes more complicated.

A tax expert can assist you with obtaining the necessary financial and tax information from your investment accounts, utilizing any credits or deductions to which you are eligible, getting your income tax returns ready, and giving you suggestions based on your financial position.

Additionally, a tax expert may provide you with income tax estimates, including quarterly expected payments, lowering the possibility of unpleasant shocks if your tax status changes.


7. Be a Member of a Reliable Credit Union

Credit unions are member-owned, non-profit, financial cooperative institutions that cater to certain membership categories under the general direction of director boards made up of volunteers.


According to the National Association of Federally-Insured Credit Unions, “By virtue of their unique cooperative structure and mutual purpose, credit unions have been exempt from federal income tax since 1935."

“Those basic defining characteristics of a credit union, no matter the size, endure today as they did then. While competing financial institutions with different organizational structures have often challenged credit unions’ tax-exempt status, Congress has consistently affirmed the credit union tax exemption.”


In other words, being a member of a credit union allows you to make the most out of your income by being exempted from federal tax. With your taxable income that needs to be worked on for tax season, credit unions have financial services that can help you.

Additionally, you can get in touch with credit union members to reduce stress and encourage the development of financially smart members during the challenging tax season. There are a few periods of the year when people generally worry about money, but tax season is by far the most common that a credit union can be very beneficial.


Bottom Line

Finding a reliable tax professional, gathering paperwork, understanding your filing status, and other tasks may take a lot of time and effort when getting ready for tax season. However, planning can make this process less stressful.

The time to start preparing for tax season is right now. You might not need to hustle to make the tax filing deadline if you set aside some time at the end of your workday or over the weekend to get everything ready.


Back to Blog

Related Articles

How To Use Your Tax Refund Wisely

Getting your tax refund is always a relief, and it’s a way to treat yourself more than usual. You...

Tax Document Checklist: What to Gather Before Filing Your Tax Return

Filing your tax returns typically requires a bunch of documents and paperwork you need to prepare....

How to Achieve Financial Security: A Roadmap to Financial Freedom

Everyone wants financial security, but getting to that point is not something everyone can easily...