Whether you receive a big refund or face a bill on tax day, taking action now can ensure next year’s tax bill is optimized by not paying a dollar more than necessary. Here are tips on how to do just that:

Organize last year’s tax records.

Create a file to hold your completed tax return, supporting schedules and documentation. Organize the file so it matches the flow of Form 1040 — put income documents first, followed by deductions, credits and estimated payments. Doing it this way allows for easy access to your records in the event of an audit. Once you finish with last year’s file, create a checklist of expected documents and a new file for 2023. This will help you keep track of your tax paperwork during the year and speed up the tax filing process in 2023.

Update paycheck withholdings and forecast estimated tax payments

Reviewing and updating withholdings now gives you several months to spread out the tax impact on your daily finances. Adjust your paycheck withholdings using Form W-4 with your employer to either increase or decrease your anticipated refund. If you are self-employed, you can instead adjust your quarterly estimated payments. Other factors will change your 2023 tax liability, but using your 2022 refund or tax bill as a baseline to update withholdings is a good first step. Just make sure your withholdings or estimated tax payments cover enough of your tax bill, or you may be subject to an underpayment penalty. For the IRS, if you expect to owe at least $1,000 in tax after your withholding and refundable credits, you need to have prepaid at least 90% of the current year's tax. State requirements vary, so you should consult with a tax professional or the state tax department to avoid state penalties.

Schedule a tax planning appointment.

Midyear tax planning is essential to ensure the proper roadmap is in place to realize your tax goals. Using your 2022 tax return is a good starting point for your plan, but it’s not enough. Getting married or divorced, planning for retirement, having or adopting a child, buying a house, paying for college, starting a new job, or getting a raise are just some of the life changes that can dramatically change your tax situation.

Most of us want to forget the hassle of tax season as soon as the form is filed, but the savvy taxpayer uses this time to prepare and plan for a better tax result next year. If you would like guidance on preparing for the next tax season, click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.

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