Preparing for Tax Season: 6 Practical Steps
By Brian Famigletti, Managing Director & Head of Marketing
1. Start Early
The new year may still feel fresh, but April has a way of creeping up on us. Here are a few tips to consider as you begin preparing for tax season.
First and foremost, start early. Waiting until the deadline can increase both stress and the risk of costly mistakes. Organizing documents ahead of time helps create a clearer picture of income, deductions, and potential liabilities.
That means saving and setting aside all documents required to file a complete return: income statements, prior-year tax returns, documentation for charitable contributions, mortgage interest, property taxes, eligible medical or childcare expenses, and so on.
Address and name changes should also be updated with the IRS and Social Security Administration before filing, too.
2. Review Contribution Opportunities
The second step is to make the most of tax-advantaged accounts. Even after the calendar year ends, there may still be opportunities to reduce taxable income.
Certain accounts allow contributions up to their 2025 maximums through the filing deadline: April 15, 2026. Currently, those maximums are:
- $7,000 for individual retirement accounts (IRAs), plus $1,000 in catch-up contributions for taxpayers age 50 or older in 2025
- $4,400 for single coverage under high-deductible health savings accounts (HSAs), plus $1,000 for those age 55 or older in 2025
Employer-sponsored retirement plans operate on different timelines. While prior-year contribution windows may have closed, increasing contributions for the current year can help manage future tax exposure.
Making eligible contributions before tax day can help lower current-year taxes while supporting long-term goals.
3. Plan for the Future
Preparing for tax season can double as an opportunity to review broader tax efficiency.
There are several strategies that can help manage liabilities year-round, not just during tax season. These include:
There are also perennial pitfalls to understand and navigate, such as the wash sale rule.
These considerations are most advantageous when addressed proactively, rather than reactively.
4. Understand Payment Options
If taxes are owed, investors should consider liquidity sources carefully.
Selling investments may generate additional tax burdens, or disrupt a portfolio’s asset allocation over the long-term, potentially offsetting any near-term liquidity gains.
Other alternatives include paying the IRS via Installment plans, taking out a loan, or using a credit card. But of course, each of these options carry their own trade-offs. Hence why it is important to evaluate well ahead of time.
5. Budget for a Refund
On the flip side, if you expect to receive a refund, it may be worth budgeting for it well in advance.
Rather than viewing a refund as discretionary windfall, it may be used to strengthen financial foundations. Reducing high-interest debt, building emergency reserves, or adding to retirement savings may be worth more in the long run than any short-term purchase.
6. Consider Working With a Professional
Finally, working with a financial advisor or tax professional can help ensure contributions are structured correctly and coordinated across accounts. This step is often overlooked, yet it can meaningfully affect both current taxes and long-term savings.
Many investors benefit from year-round tax planning rather than a once-a-year review. Ongoing coordination between an investment strategy and tax planning can help you manage liabilities more effectively over time.
If you’d like help preparing for tax season and integrating tax planning into your broader financial strategy, contact Griffin Asset Management to speak with an expert.
Source:
Morgan Stanley: Are You Prepared for Tax Day?
