How to Prepare for Your Tax Filing: Here's What You Need to Know

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  How to Prepare for Your Tax Filing: Here's What You Need to Know

Whether you're filing as an individual or a business owner, having your documents and financial records organized will help you maximize deductions and avoid common filing errors. Here’s a step-by-step guide to ensure you’re fully prepared for tax season.

1. Gather Your Personal Information

Before you start your tax return, make sure you have the necessary personal details, including:

  • Social Security Number (SSN) or Taxpayer Identification Number (TIN) for yourself, your spouse, and any dependents

  • Bank account details for direct deposit of refunds

  • Previous year’s tax return for reference, if applicable 

2. Collect Your Income Documents

The IRS requires you to report all sources of income. Depending on your employment status and financial activities, you may receive various tax forms, such as:

  • W-2 Form: If you’re an employee, your employer will provide this form showing your wages and tax withholdings.

  • 1099 Forms: If you earned income as an independent contractor, freelancer, or gig worker, you may receive a 1099-NEC or 1099-K. Other 1099s include:

    • 1099-INT (interest income)

    • 1099-DIV (dividends)

    • 1099-G (unemployment benefits)

    • 1099-R (retirement income)

  • K-1 Forms: If you have a partnership, S-corporation, or trust income, you may receive a Schedule K-1.

  • Rental Income Statements: If you own rental properties, collect rent records and related expenses.

3. Organize Your Deduction and Credit Documentation

Deductions and tax credits can lower your taxable income and increase your refund. Keep receipts and documentation for:

Common Tax Deductions

  • Mortgage Interest & Property Taxes (Form 1098)

  • Student Loan Interest (Form 1098-E)

  • Medical and Dental Expenses (if they exceed a percentage of your income)

  • Charitable Donations (cash and non-cash contributions)

  • Business Expenses (if you’re self-employed, include home office expenses, mileage, and supplies): If it’s challenging for you to keep tracking mileage and expenses with receipts, you may consider using an app which offers receipt scanning and mileage tracking with GPS-for instance, Expensify offers free for up to 25 receipts per month or ZOHO app provides these for monthly $5 per user; check more options with various reviews.

Popular Tax Credits

  • Child Tax Credit

  • Earned Income Tax Credit (EITC)

  • Education Credits (American Opportunity Credit, Lifetime Learning Credit – Form 1098-T)

  • Energy Efficiency Home Improvement Credits

4. Track Estimated Tax Payments and Withholdings

If you made quarterly estimated tax payments, gather your payment records to ensure proper credit. Also, review your W-2 and 1099 tax withholdings to check if you need to make additional payments to avoid penalties.

5. Consider Retirement Contributions

Contributions to IRAs, 401(k)s, or other retirement accounts may be tax-deductible. If you haven’t maxed out your contributions, you may still have time before the tax deadline.

6. Review Any Changes in Tax Laws 

Tax laws change frequently, and staying informed can help you optimize your return. Be sure to check for updates on:

  • Standard deduction amounts

  • Income tax bracket changes

  • New deductions or credits you may qualify for

7. Choose the Right Filing Method

Decide whether you’ll file taxes:

  • By Yourself: Using tax software can be a good option if your return is straightforward. As I mentioned in my previous posting, the IRS offers Direct File Programs-taxpayers in 25 states can use for free tax filing- and extended free guided tax software for individuals with an Adjusted Gross Income (AGI) of $84,000 or less.  If you’re not sure which software is best for you, you may check some reviews.

  • With a Tax Professional: If you have a complex financial situation, a CPA or tax preparer can ensure accuracy and help maximize your refund. If you're unsure about certain tax laws or deductions, consulting a tax professional can help you maximize savings and stay compliant with IRS regulations.

8. File Your Taxes Early and E-File for Faster Processing

The IRS began accepting tax returns on January 27, 2025 for the 2024 tax year. Filing early can help prevent identity theft and avoid last-minute stress. If you expect a refund, e-filing with direct deposit is the fastest way to receive it.

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