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Year-Round Financial Tips to Make Taxes a Breeze

Updated for Tax Year 2016


You might normally only think about tax preparation come April, but making it part of your year-round money management strategy has some major benefits. Not only does it prevent the tax rush stress in April, but it keeps finances at the front of your mind all year, which can benefit your overall financial health. Not sure where to start? Try these tips to transition from a “tax season” mindset to a “tax year” approach and save yourself some sleepless nights.

Check in With Your Finances Monthly

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One strategy for avoiding a tax-related headache in April is to set up a monthly appointment with yourself to check in on your tax maintenance, especially if your income fluctuates from month to month.

  • To start, look over your household income for the previous month and for the year to date, then use that to calculate what you’re likely to earn this year in total.
  • Revisit your income each month to record any fluctuations and update your anticipated yearly earnings as needed.

Doing this regularly lets you know early on if you’re shaping up for a higher-than-expected annual income, so you can anticipate a larger tax liability or higher effective tax rate than you originally anticipated.

You’ll also want to take this time to look at how much your employer has withheld in taxes so far (or how much you’ve withheld, if you’re self-employed), to ensure it’s on track to cover most or all of your tax liability based on your projected income.

  • If you’re self-employed, this also keeps those quarterly income tax payments from surprising you, and protects you from overpaying on your tax installments only to get a refund later.

While you’re at it, go over your total monthly budget, too. You might discover ways to trim your expenses and contribute more to your 401K retirement plan or 529 college plan, both of which might reduce your tax liability for the year.

Talk Taxes With Your Spouse

If you’re married, involve your spouse in your monthly tax check-up, especially if one or both of you has started a new job. Otherwise, you might be in for a surprise come tax time.

That’s what happened to Kaitlin Morrison, a freelance writer, and her husband Jeff Greenlund, a chemist based in Washington State. “We went the whole first year of his new job without talking about taxes, and in April, when I began filing, I was in for a surprise. We didn’t have enough withheld,” says Morrison. “We owed over $1,000.”

Team up to do monthly tax “audits,” so you can anticipate how a new—hopefully, bigger—paycheck will affect your tax liability for the year. If you find you’re not withholding enough, you’ll have time to adjust your tax withholding before you file and before you’re looking at a four-figure tax bill.

Keep Track of Receipts

It’s tough to match the stress of tracking down a year-old receipt to legitimize one of your tax deductions, which is why keeping track of your paperwork should be a year-round activity.

Keep a folder at home to track bills and receipts as they come in and carry a small folder to stash receipts on the go. Take an inventory of your receipts each month as part of your tax check-in and organize documents so they're all in one place and easily accessible when you are ready to file your return.

Check in With an Adviser

Consulting a financial adviser a few times a year can make tax season a breeze. They may be able to identify deductions you might not have discovered otherwise. Finding that out during the tax year, rather than when you’re preparing your return, gives you time to track down the documentation you need to maximize your tax benefits.

Financial advisers can also help you estimate which tax credits you may be eligible for and how they can impact your tax liability. Talking about your tax strategy with someone knowledgeable will give you peace of mind and make the tax season easier.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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