6 Steps Toward Making the Upcoming Tax Season Stress-Free

Posted on January 6, 2022 at 8:00 AM PST by

Once again the whole world seems to be rushing toward the end of December, headlong into a long holiday break.

Soon, however, it will be over and a new year will begin. Thinking about money during a holiday is no fun, so it’s probably best to start putting your ducks in a row now.

There’s two big buckets here: investments and taxes. Let’s tackle investments first.

Decide if you’re going to sell any stock this year or next: Any dogs in your portfolio that need to go might be better off liquidated now for the tax break they generate. If it’s more than you need to offset gains, the losses can be carried forward against income taxes.

Top off your 401(k) contributions: If you calculated things right to hit the maximum for the year you might not need to take action. But if you get that last pay stub and fall short, early next year is too late to put more in. Talk to your HR rep about where you stand.

Rebalance, or at least set a date to rebalance soon: If you are in an target-date fund you likely don’t need to do this, but any money you have elsewhere could stand a review and reconsideration of your goals for the years ahead. Even if you take no action, it’s a good idea to look over your accounts and make sure your risk-reward calculations are still applicable.

Now, taxes

This is a broad topic, but here are a few things it will pay to think about now rather than later.

Gather up your non-employment paperwork: You’ll get W-2 and 1099 forms soon enough. In the meantime, if you work from a home office or spent money running a side business, sort out your receipts. Gather up any charitable receipts and statements from banks and brokerages.

Make any charitable contributions you have planned: If you would benefit from writing a check or giving away household items, get that done and documented.

Prepare to pay any taxes due: You may have had enough taken out of your check, but go ahead and recalculate. If you run a business, get that final quarter’s taxes paid and start to set enough to pay for the first quarter next year.

Just getting these six items off your desk by the week before Christmas can go a long way toward making your holiday less stressful and more cheery.

Merry Christmas for now and good luck in the New Year.

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