It’s hard to think about next year’s taxes while still sifting through your 2019 returns, but a little preparation early on can help make filing much less painful.
Get Organized Now
To begin, the more meticulous you are at keeping records throughout the year, the easier it’ll be to prepare your taxes. To this end, have a filing system that allows you to organize key documents like pay stubs, tax forms, and expenses you’re planning to write off. That last category is especially important if you’re self-employed and plan to deduct some of the costs involved in earning your income.
In addition, make your files easy to access so you can add to it as documents come in so they don’t pile up somewhere else. This should include a copy of last year’s return for easy reference and a great jumping-off point for next year’s tax prep.
Keep Your W-4 Updated
Another essential document is your W-4. The key to paying the right amount of tax is to update your W-4 regularly. Do this whenever you have a major personal life change. The goal is to reduce the potential for both a tax bill and a tax refund to zero, or close to it. But if you count on a big tax refund every year, you should also pay attention to your withholding, because how much you have withheld directly impacts your refund.
California’s new individual health insurance mandate (2019 Ch. 38, SB 78) requires state residents to maintain minimum essential coverage (MEC) for themselves and their dependents starting on Jan. 1, 2020, or pay a state tax penalty. The legislation also establishes a three-year program to provide additional state subsidies to help certain households purchase coverage through Covered California, the state’s public exchange.
You may still have time to apply if you meet certain criteria. Major life events such as relocation, marriage, childbirth, or lost coverage can be qualifying life events that allow new enrollment in a plan outside of the regular open enrollment period. There are also new state subsidies that may be available to you when you enroll.
Remember, keeping your family covered not only keeps them healthy, but protects you from penalties when it comes to tax time next year.
Seek Out Tax Assistance
Lastly, get tax preparation assistance if you need it. As part of Home Start’s Communities In Action program, we help hundreds of San Diegans make the most of their tax returns every year. If you’re currently struggling with your 2019 or previous years’ tax returns and your family earned $54,000 or less, we can help. For additional links and information visit our Free Tax Prep page.