By: Sean Gallagher, CFP®
Tax season is approaching, and this time of year can feel overwhelming for many individuals and business owners. The key to a stress-free tax filing experience is organization. By proactively gathering and structuring your financial documents, you can maximize deductions, avoid errors, and ensure a smoother process when working with your tax preparer or filing independently.
Step 1: Gather Income Documents
The first step in organizing your tax documents is to compile all necessary income-related forms.
W-2 Forms: If employed, your employer will provide a W-2 by the end of January, summarizing your earnings and tax withholdings.
1099 Forms: If you are self-employed, a freelancer, or have additional sources of income, you may receive various 1099 forms, such as:
1099-NEC for non-employee compensation
1099-MISC for miscellaneous income
1099-K for third-party payment processing (e.g., PayPal, Stripe, Venmo)
Social Security, Pension, and Annuity Income: If you receive Social Security benefits, pension distributions, or annuities, you should receive Form SSA-1099, Form 1099-R, or other relevant forms documenting these payments.
Investment Income: If you have investment or bank accounts, you may receive Form 1099-B for stock and mutual fund transactions, Form 1099-INT for interest earned, or Form 1099-DIV for dividend income.
Other Income Documents: Rental income (Schedule E), partnership or S-Corp earnings (K-1s), alimony received, or state tax refunds from the previous year.
Step 2: Organize Deduction and Credit Documentation
Properly tracking deductible expenses and tax credits can significantly reduce your taxable income and tax liability.
Charitable Contributions: Collect receipts or acknowledgment letters for any donations made to qualified charities.
Medical Expenses: If your medical costs exceed a certain percentage of your income, you may be eligible for deductions. Gather receipts, statements, and insurance records.
Mortgage Interest and Property Taxes: Form 1098 from your mortgage lender will show how much interest you paid. Property tax statements are also needed.
Student Loan Interest and Education Expenses: Form 1098-T (tuition payments) and Form 1098-E (student loan interest paid) can help claim education-related deductions.
Childcare Expenses: If you paid for daycare or after-school care, keep records and receipts, as you may qualify for the Child and Dependent Care Credit.
Retirement Contributions: Contributions to IRAs, 401(k)s, and self-employed retirement accounts may be deductible. Your plan administrator or financial institution (such as Charles Schwab) should provide tax documents, like Form 5498, showing contributions made during the tax year.
Business and Self-Employment Expenses: If you’re self-employed, track expenses such as office supplies, business travel, home office deductions, and professional fees.
Step 3: Use a Tax Organizer or Digital System
To avoid last-minute scrambling, consider using a tax organizer—either a physical folder system or digital tools such as spreadsheets or tax preparation software. Many tax professionals provide checklists to help clients stay on track. Having last year’s return handy can also help you reference income, deductions, and credits you may need again.
Physical Filing System: Use labeled folders for income, deductions, and credits.
Cloud Storage: Securely store digital copies of documents within cloud storage. HIGHLAND clients may also use the ClientView portal vault for this purpose.
Expense Tracking Apps: Consider using apps like QuickBooks to categorize deductible expenses throughout the year.
Step 4: Double-Check Deadlines and Contact Your Tax Professional
The IRS deadline for filing 2024 tax returns is April 15, 2025.
If you need more time, consider filing for an extension (Form 4868), but remember that an extension to file does not mean an extension to pay any taxes owed.
If working with a CPA, schedule an appointment early to ensure they have ample time to review your documents.
By staying proactive and organized, you can confidently navigate tax season, reduce your tax burden, and ensure accuracy in your filings. These steps now will help you avoid stress and potential penalties while maximizing your tax benefits.
Sean Gallagher is a CERTIFIED FINANCIAL PLANNER™ at HIGHLAND Financial Advisors, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, and investment management. Sean graduated from Virginia Tech’s financial planning program in 2018 and successfully passed the CFP® national exam in 2019. As a Financial Planner at HIGHLAND Financial Advisors, Sean works on developing comprehensive financial plans and investment management for all clients.