How Early Should You Budget for Tax Season?
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How Early Should You Budget for Tax Season?

Many people don’t like talking about that looming April deadline because it’s intimidating, but you can learn how to budget for tax season by reading these simple tips.

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When you’re old enough to start filing your taxes yourself, you know you’ve reached adulthood. Many people don’t like talking about that looming April deadline because it’s intimidating, but you can learn how to budget for tax season by reading these simple tips. You’ll never miss out on a refund if you know how to prepare for your unique tax situation.

When Should You Start Preparing Taxes?

The best time to start preparing your taxes is right after filing for the previous year. You’ll know if you paid enough in taxes to get a refund or if you were behind. Fixing your financial situation according to that experience will help you get ahead of next year’s taxes.

You’ll want to revamp your budget a year early because taxes should come out of every paycheck. That happens automatically if you get a W2 from your employer at the end of the year, but independent contractors must pay their taxes quarterly to avoid late fees when filing in April of the following year.

You may be okay if you earn a W2 and start preparing your taxes a week before your filing appointment in April. Independent contractors who don’t pay quarterly taxes and only think about what they owe for the year in April may find themselves swamped with a bill for thousands of dollars due within 30 days.

How to Budget for Tax Season

Reading about tax bills might seem scary, especially if you’ve never filed for yourself. Before you get worried, read these tips to learn how to budget for tax season according to your income.

1. Find a Certified Public Accountant

Certified Public Accountants (CPAs) go to college to earn a degree in accounting. They memorize tax laws and become math experts to help people save and plan for their taxes. It’s in everyone’s best interest to make an appointment with a CPA before paying their taxes to learn what they owe based on their financial situation. A CPA will also complete all necessary paperwork to ensure you don’t miss any forms or deductions.

2. Seek Free Financial Assistance

Fees are the only downside to working with a CPA. They often charge hundreds of dollars for their services, which can come straight from your tax return. If you don’t get a return because you’re behind on your taxes, you’ll have to pay their fees out of pocket.

There’s help available for anyone who can’t afford a CPA’s services. You can check out free services from groups like:

  • IRS Free File
  • Volunteer Income Tax Assistance
  • Tax Counseling for the Elderly
  • MilTax

These groups often have income or job qualifications limiting their help to people in specific careers or tax brackets. See if you qualify for assistance before making an appointment with a CPA who charges their full hourly fee.

3. Use a Tax Withholding Estimator

Independent contractors have the most to prepare before the April filing deadline. They need to differentiate their gross and taxable incomes, which don’t count toward tax percentages equally. Their taxable income minus annual deductions will reveal how much contractors should pay quarterly. You can use the IRS’ tax withholding estimator to get that information more quickly.

4. Calculate Your Tax Credits or Deductions

Although tax credits and deductions can change each year, checking which ones could affect your tax bill before filing in April is essential. Look into applicable deductions for the current year, such as:

  • Charitable contributions
  • Child tax credit
  • Student loan interest deductions
  • Education expenses like tuition and student fees
  • IRA deductions

A CPA can help identify these savings because they’ll know which are up-to-date. Tax professionals assisting through discounted or free community programs will also guide you through deductions while filing between January and April.

5. Schedule Necessary Quarterly Payments

The most important part of preparing for tax season will be scheduling a filing appointment before the April deadline or paying quarterly payments throughout the year if you’re an independent contractor.

The most important part of preparing for tax season will be scheduling a filing appointment before the April deadline or paying quarterly payments throughout the year if you’re an independent contractor.

Start Budgeting for Tax Season

It’s never too early to start budgeting for tax season. If you know what you’ll owe and what you can deduct in the spring, you’ll never get behind on your state and federal payments. Talk with a certified tax professional to better understand your unique income situation and get ahead of the game.

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This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
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