Tax season is upon us, and you might as well start prepping now. By getting ahead of the frenzy, you’ll be able to feel relaxed — and maybe even a tad smug — when April rolls around. Here are three simple ways to get ready to file.

After the best time of the year (holidays! cookies! resolutions!) comes one of the most dreaded times of the year: tax season.

Since, unfortunately, there’s no avoiding your taxes, you might as well start prepping now. By getting ahead of the frenzy, you’ll be able to feel relaxed — and maybe even a tad smug — when April rolls around.

Here are three simple ways to get ready to file.

Know your documents & dates

While you’ve probably had the individual tax filing deadline — APRIL 15 — pounded into your head for years and years, you might not know this date serves as a deadline for other purposes, as well.

April 15 is also the last day to:

    • Contribute to an Individual Retirement Account (IRA) and have it count for the previous year (in this case, 2018). If you haven’t maxed out your IRA yet, now’s your chance.
    • File a tax extension. Not ready to face all that paperwork? File Form 4868, which will give you an extra six months to finish your taxes. In some states, like California, this automatically extends your state tax filing deadline, as well; in others, like New York, you’ll need to complete a separate form. Note that, while you can delay the paperwork, you can’t delay the payment. You’ll need to estimate how much you owe, and pay that by April 15 to avoid penalties and interest.
    • If you’re ready to file now, there’s no need to wait until April. You can submit your tax return as soon as you receive all of your paperwork, which should be from January through March.

Depending on your situation, here are some documents you might need:

    • W2 from your employer
    • Schedule K-1 for income received from an estate, trust, partnership, or S-corporation
    • 1095-A for health insurance through the Marketplace
    • 5498 for contributions made to IRAs
    • 1098 for mortgage interest; 1098-E for student loan interest
    • And a whole slew of 1099s:
      • 1099-MISC: income from contract work over $600
      • 1099-DIV: earnings from stocks and mutual funds
      • 1099-INT: interest from bank accounts and CDs
      • 1099-B: income from selling stocks, bonds, or mutual funds
      • 1099-R: distribution from retirement accounts or pensions

If you’re a Wealthfront client, you can download your documents directly from your dashboard. Your forms (1099-R for IRA withdrawals, consolidated 1099s for taxable accounts) will be available by February 15. But you may receive additional correction documents going into March.

Figure out how you’ll file

You have two main options when it comes to filing your taxes: doing it yourself or hiring an accountant.

Going the DIY route? Consider TurboTax. If you’re a Wealthfront client, you’ll get $15 off a Premier and $20 off a Self-Employed filing. We also make it easy to import your Tax-Loss Harvesting and Stock-level Tax-Loss Harvesting info. Other popular tax preparation programs include TaxAct, Credit Karma Tax, and TaxSlayer.

If your taxes are complicated, however, you should consider getting professional help. Here are nine signs you should hire an accountant, including earning more than $200,000, being subject to Alternative Minimum Tax, owning a business, or anticipating a big capital tax gain.

Choosing an accountant doesn’t have to be intimidating — ask these 11 questions and you’re bound to find a good fit.

Decide how you’ll pay (or use your refund)

Even if you haven’t filed yet, you hopefully have an inkling of whether you’re going to owe money or get a refund.

If you’re in the red, your cheapest and easiest option will be paying the IRS with a direct debit from your checking or savings account.

Note we said debit, not credit. Although you might be tempted to charge your tax bill — and earn those coveted rewards points — we don’t recommend it. That’s because you’ll pay fees of nearly 2%, and if you don’t pay your statement in full, will also be on the hook for double digit interest rates.

Don’t have the money to pay right now? Then consider borrowing money at a low interest rate.

For example, if you’re a Wealthfront client with a taxable account of at least $25,000, you could take out a Portfolio Line of Credit at a low interest rate (6.41% as of June 12, 2024). Or, you could go directly to Uncle Sam and sign up for an IRS payment plan.

If, on the other hand, you’ve got a refund on the way, treat yo’ self to something nice! And then use your refund as fuel for your important goals.

Here are a few ideas:

    • Pay off high-interest debt.
    • Invest in your future by putting the money into an IRA or taxable account. (We can help with this!)
    • Save it in a high-interest cash account for your short-term needs. (Hint, hint: we’ll have one soon)
    • Boost your career by enrolling in a course or certification program.

In our next blog post in this series, we’ll dive deep into the nitty gritty of taxes: which deductions and credits to claim, whether or not you should itemize, and how to leverage your investment losses. You won’t want to miss it!

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Wealthfront Advisers and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisors to discuss Required Minimum Distributions and all other tax-related matters for their specific situation.

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Nothing in this communication should be construed as an offer, recommendation, or solicitation to buy or sell any security. Investment advisory services are only provided to investors who become clients by way of a written agreement, are designed to aid our clients in preparing for their financial futures and allow them to personalize their assumptions for their portfolios.

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About the author(s)

The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives. View all posts by The Wealthfront Team

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financial planning, taxes