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  • Writer's pictureJohn J. Diak, CFP®

How to Wrap Up Your Taxes With Confidence and Prepare for Next Year


Every year, as tax season approaches, we're given an opportunity to improve our financial planning and take control of our obligations. We set intentions to be more organized, prepared, and proactive, ensuring that we optimize our tax responsibilities. While the deadlines may seem daunting, they serve as reminders to prioritize our financial well-being. If you've found yourself in a last-minute rush in the past, remember that each year brings a chance to break the cycle and approach tax season with confidence and positivity. You're not alone in this journey towards greater financial empowerment.


Getting ready for tax season can sometimes feel overwhelming, but having the right information and documents on hand can streamline the process significantly. Below, we've compiled a handy checklist to help you prepare effectively and ensure you have everything you need to file your taxes accurately and on time.


Personal and Financial Information:

To get started, you’ll need various numbers and bits of data, including: 

  • Tax identification numbers

  • Social security numbers for you and your spouse

  • Identity protection PINs

  • Banking details for direct deposits or payments

  • Applicable foreign reporting and residency information

  • Relevant information about your dependents (Include tax identification numbers, social security numbers for you and your spouse, identity protection PINs, and banking details for direct deposits or payments)


Income Information

Collect all necessary documents for reporting your income, such as: 

  • W-2s

  • 1099s

  • Detailed records of self-employment expenses

  • Record of estimated tax payments (1040-ES)

  • Rental income and expenses

  • Asset information for depreciation

  • Record of retirement income from pensions, IRAs, and annuities (1099-R) and Social Security (SSA-1099)


Next, gather the details and paperwork related to your savings, investments, and dividends. This may include: 

  • Interest and dividend income (1099-INT, 1099-OID, 1099-DIV)

  • Income from sales of stock or other property (1099-B, 1099-S)

  • HSA and long-term care reimbursements (1099-SA or 1099-LTC)

  • Record of estimated tax payments made (Form 1040–ES)

  • Transactions involving cryptocurrency/virtual currency

  • Dates and expenses related to investments or properties sold


Don’t forget to include things like hobby income, prizes and awards, gambling income, jury duty, alimony, state tax refunds, royalty income, trust income, and more. 


Document Deductions

If you’re planning to take deductions, ensure you understand the requirements and gather the corresponding documentation.


For deductions related to vehicle and home ownership, you should compile:

  • Real estate and property tax records

  • Mortgage interest statements

  • Receipts for energy-saving home improvements

  • Information on electric vehicles


For cash and non-cash charitable donations, ensure you have:

  • Records of donations to philanthropic organizations, schools, and places of worship

  • Documentation of miles driven for volunteer work


If you intend to take deductions related to health care, you will need: 

  • Receipts for medical expenses from doctors, dentists, hospitals, and insurance providers

  • Documentation of qualified insurance premiums


If you have childcare or education expenses that qualify for deductions, you’ll need the following documentation: 

  • Receipts for payments to daycare providers and babysitters

  • Documentation of expenses for educational institutions

  • Student loan interest documentation (Form 1098-E)

  • If you're an educator, records of classroom expenses


Finally, for other deductions such as property taxes paid or retirement contributions, you’ll need: 

  • Documentation of state or local income, sales, vehicle, or personal property taxes paid

  • Retirement and savings contribution records (Forms 5498)

  • Records of expenses related to federally declared disasters


These lists are far from comprehensive, but they should give you a head start on getting and staying organized. Check with IRS.gov for more information, or consult with your tax professional for tailored advice.


Organizing Your Tax Documents

Creating a tax prep checklist is the first step toward a smoother tax season. This approach ensures you're not just reacting to tax season's demands but proactively managing your finances with clarity and confidence. 


A simple recordkeeping system organized in a way that makes sense to you will do the trick. The goal is to be able to put your hands on any documents you need quickly. A bank statement alone won't suffice for verifying expenses; you'll need detailed records like receipts, canceled checks, and copies of bills.


Your system doesn’t have to be complex; you can simply organize papers into categorized folders — income, medical expenses, banking info, etc. For added security, consider photographing or scanning documents and receipts. Utilizing a receipt tracking app and jotting down notes can also streamline the process. Establishing these practices year-round will significantly simplify your tax season preparations.

When to Hire a Professional

When you’re just starting out in your career, preparing your taxes can be a relatively straightforward process, especially if you have minimal assets or don't need to itemize deductions. Many choose a do-it-yourself approach or budget-friendly tax preparation services under these circumstances. This straightforward method might still work well for you if your financial life remains uncomplicated — meaning no dependents, retirement accounts, or substantial assets.


When your circumstances become more complex, the expertise of a professional tax preparer becomes invaluable. Whether you find yourself in a higher tax bracket, navigating self-employment, juggling multiple sources of income, or managing complex investments and assets, the guidance of a professional is essential. The constant evolution of tax laws, forms, and deadlines can be daunting, presenting significant challenges and opportunities for errors.


Tax professionals are well-versed in the nuances of IRS rules and can help you sidestep potential pitfalls like overlooked deductions or actions that could prompt IRS scrutiny. You’ll have someone in your corner to handle the tactical elements of taxes, such as reporting income and disclosing the value of assets. They take on much of the hassle, minimize your stress, deal with the IRS, and answer any questions that you have along the way.


How Your Financial Advisor Can Help with Tax Prep

Tax planning is a critical component of a well-rounded financial strategy. Your financial advisor plays a crucial role in ensuring that your tax strategies are in harmony with your broader financial objectives, including investment management, retirement preparation, philanthropy, estate planning, and overall wealth management.


A skilled financial advisor will guide you in making informed tax-saving choices throughout the year with a bird’s eye view of your long-term financial goals.  Tax planning becomes not just a task but a strategic component of your financial toolkit.


Who is helping you manage capital gains and losses strategically? Oatley & Diak, LLC an assist with this. 


Ready for Tax Season?

Tax preparation requires careful planning, organization, and communication. While it might not be the most thrilling task, it's an unavoidable aspect of financial responsibility. Familiarize yourself with the process and seek personalized advice from qualified professionals. Keeping your financial records in order and collaborating closely with your tax advisors ensures you're well-prepared for what lies ahead. Embrace these habits now, and you'll pave the way for a more efficient tax preparation process in the future.


John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.

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