30 sec brief
When tax season finally ends, it may be tempting to shove every bit of paperwork into your deepest, darkest drawer. It’s a relief to ignore W-2s, 1099s, and 1040 for another year, but are you missing an opportunity to get ahead? Absolutely. We get it. Spending another minute on taxes may be the last thing…
When tax season finally ends, it may be tempting to shove every bit of paperwork into your deepest, darkest drawer. It’s a relief to ignore W-2s, 1099s, and 1040 for another year, but are you missing an opportunity to get ahead? Absolutely.
We get it. Spending another minute on taxes may be the last thing you want to do. A little discomfort now could pay off next year, though — especially while mistakes are still fresh. Here’s how to get started on your 2020 tax checklist.
1. What went wrong or could have been better?
Reliving past mistakes never feels good, but it’s the best way to avoid repeating them. Take a few minutes to jot down where you went wrong. Did you withhold too much? Or, did you miss out on a 401(k) contribution deduction? Once you spend the time, there may be more room for improvement than you expect.
2. Take a closer look at your withholding
As life happens, your needs change. If you work for someone else, it’s important to check on your W-4 withholding throughout the year. There are many things that may change your tax situation. Some of the most common include job moves, unemployment, marriage, divorce, and children.
To avoid unpleasant tax surprises, set a reminder to check your withholding a few times a year. You can give yourself a quick “paycheck checkup” with the IRS’ Withholding Calculator. If you realize your withholding isn’t right, don’t be afraid to ask your employer for a new W-4.
3. Stay on top of quarterly estimated taxes
For 1099 and self-employed folks, quarterly estimated taxes are more than a hassle. If you didn’t pay enough, you may have received a big tax bill — with late penalties, to boot. Skip the headache next year by adding these deadlines to your calendar:
- April 15, 2020 (January – March)
- June 17, 2020 (April – May)
- September 16, 2020 (June – August)
- January 15, 2021 (September – December)
If calculating how much you owe is too difficult, don’t be afraid to ask for professional help. The IRS charges a fee for underpayment, so it may be worth it to know you’re paying the right amount. If you prefer to do it on your own, you can refer to this worksheet.
4. Get organized with healthcare
If you have been lax with healthcare, now is the perfect time to take a more proactive approach. For starters, if you have a high-deductible health insurance plan, see if you qualify for a health savings account (HSA). This account may save you money with three different tax benefits. For any withdrawals, it’s important to save receipts to prove they were for qualified medical expenses.
Marketplace health insurance can have a big impact on your taxes too. The individual mandate may be going away, but the government still expects you to stay on top of subsidies. If you earn too much, you may have to pay back some or all of the assistance you received.
It’s never too easy to plan for next year
After tax season, it’s normal to feel deflated, but don’t let last year’s missteps derail your future. Do yourself a favor and shift angry feelings into proactive steps for next year. Your future self will be grateful for the smart moves. You may even find it sparks motivation in other areas of your financial life.
About the author
We are HSA Experts! Lively is a Health Savings Account (HSA) platform for employers and individuals. A 401(k) for healthcare.