Reduce the Stress: Here are Simple Tips for Tax Time Financial Planning

Tax filing season has started! Tax time can be stressful, but it doesn’t have to be. Here are some helpful tips to get through tax time with ease. 

Organize Your Records 

Create a system for organizing your tax documents as they arrive. Unfortunately, these documents typically arrive sporadically during January and February and can be difficult to track. Choose a folder in your file cabinet or on your computer where you can stockpile all the documents you’ll need to file. 

What’s Changed Since Last Year? 

Make note of anything that is different this year. 

• Did you change jobs? 
• Did you have multiple jobs? 
• Did you have a baby? 
• Did you get married or divorced? 
• Did you move to a new state? 
• Did you buy a house? 

File and Pay on Time 

The due date for taxes this year is April 18. The Internal Revenue Service will assess penalties if you file late or pay late. Be sure to file an extension if you won’t be able to file on time. You can do this with IRS form 4868 and you can download it from the IRS website. 

Watch for Scams 

According to the Better Business Bureau, tax season is a popular time of year for scammers looking to target Americans through emails, phone calls and text messages. They often pose as IRS agents asking for personal information or demanding payment. The real IRS primarily contacts taxpayers through snail mail and will not text, call or email. If they do, it’s usually to set up an appointment, not to collect pay or information. 

Look out for recalculated refund scams. A scammer might call saying that your refund was recalculated, and you are owed more than you received. They will then ask for personal information to verify the refund – this is where you get trapped. Also, beware of “rapid’ or “instant” refund claims and predatory loan servicers. 

Reducing Next Year’s Taxes 

Here are some things you can do starting now to reduce taxes this year and avoid surprises on your 2023 return. 

• Utilize the IRS withholding calculator. This is a great tool to make sure you are withholding the right amount from your paychecks. You’ll need to have a paystub ready (your spouse’s as well if they are working and you file a joint return) as well as a recent tax return. Use this tool to decide if you are withholding too much or too little from your pay and get your human resources department to correct it. 
• Contribute to your retirement savings plan. Pre-tax contributions to your 401(k) and similar retirement savings accounts reduce your taxable income now and help you build retirement funds for the future. 
• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are both great ways to pay for health care costs with pre-tax dollars. The money you put into these accounts is not taxable, so your contributions reduce your taxes in the year you put them in. Plus, any growth or interest in the account is tax free. With FSAs, just make sure you spend it all within the tax year because it is a “use it or lose it” benefit. 
• A Dependent Care FSA is another pre-tax benefit used to pay for dependent care services like day care, preschool, summer care, before- or after-school programs, or adult daycare. It’s a simple way to save some money on expenses that allow you to continue to work. 
• Save for college expenses. In Kansas and Missouri, amounts contributed to 529 college savings accounts can reduce taxes on your state tax return. These dollars grow tax free if used for qualified education-related expenses. 

Jamie Bosse (CFP) is a principal with Aspyre Wealth Partners and a board member of the Greater Kansas City chapter of the Financial Planning Association. John McGrath of Kansas City PBS produced the video.