Photo of woman preparing her files for tax season

Tax prep: 5 things you can do right now

Some people wait until the last minute to work on their income taxes. Not you. You want to be ready to roll so you can cross taxes off your “to do” list and make the most of the money you earn.

Deadline for filing 2021 taxes:
April 18, 2022

Here’s what you can do now to prepare to file your income taxes in 2022 and help make the whole process less stressful.

1. Organize your tax documents.

Start compiling your tax-related forms and information, so everything’s organized in one spot. Here’s a list to get you started:

  • Social Security numbers for you, your spouse, and your dependents (if applicable)
  • Last year’s federal and state tax returns
  • Bank statements
  • Mortgage interest statement
  • 1099 forms (for income outside of your regular salary)
  • Charitable donations (monetary or in-kind)
  • Information on any tax credits or deductions you may be eligible for

Why file your taxes early?

  • If you’re getting a refund, you get it sooner. And if you’re using it to pay off debt, sooner means less interest. If you think you’ll owe, filing early gives you (a little) more time to save for the payment.
  • It can help protect you from identity theft/fraud. (Yes, it's possible someone could file a return on your behalf and bank the cash.)
  • Your tax preparer may not be as busy in January and February, meaning there could be more time and attention for you.

Want to make it easier next year? Set up a system to gather this information monthly or quarterly throughout the year. Collect receipts and any documentation and put it in your tax folders, whether that’s a paper or digital file.

“Some people prefer to use a smartphone app to help scan, track, and store receipts—especially for business expenses,” says Tyler De Haan, director of business development retirement solutions for Principal®. “This not only helps you prepare your taxes, but digital copies could come in handy if you’re ever audited by the IRS.”

2. What tax forms do you need? Start a folder.

Companies have until January 31 to deliver W-2 forms to their employees. This is also the deadline for businesses to send Form 1099 statements that report non-employee compensation, bank interest, dividends, and distributions from a retirement plan.

Whether you receive statements via snail mail or email/online, gather and keep them in a safe place. Get a folder or large envelope, make a checklist on the outside of all the financial institutions that will send you tax documents, and add your statements as they arrive.

Graphic of a thumbtack. Tip: Receiving tax forms digitally tends to be quicker and more secure. Sign up to have your Principal tax forms delivered electronically.

Here’s a list of some of the tax forms you may receive, depending on your personal tax situation:

  • Wages and earnings statements like the Form W-2, W2G, SS-1099, 1099-R, and 1099-MISC
  • Interest and dividend income statements for bank accounts and investments (Forms 1099-INT and 1099-DIV)
  • Statements needed to adjust your income, like Form 1098-E and 1098-T

Photo of woman sitting in her kitchen, filing her taxes on her laptop.

Want to brush up on tax brackets and deductions that could impact you? Read: “What to remember.”

3. Decide how to do your taxes.

You have several options.

  • Prepare your tax return yourself using software such as TurboTax, H&R Block, or TaxAct, and file electronically.
  • Work with a tax preparer. If you choose this option, you could book your appointment now with a CPA or tax-prep service.
  • Do it yourself the old-fashioned way. Meaning, fill out the tax forms on paper and submit via mail (or scan and e-file).

De Haan says however you get your taxes done, consider filing electronically. For the tax year 2020, more than 94% of individual tax returns were e-filed.1 It saves time, tends to be more accurate, and gets you a refund faster, if applicable.

4. Figure out how to pay your income tax bill or what to do with a refund.

If you think you may receive a refund (lucky you), start thinking about what you’ll do with the money. You could:

And if you think you’ll owe Uncle Sam, you have time to save the money if you don’t have it set aside already.

You can use an income tax calculator to estimate what you'll receive or owe.

5. Tax planning: Think about next year.

A little tax planning now can go a long way toward helping you keep more of your money next year.

“Review your withholdings so you don’t have an unexpected tax bill next year. The IRS Tax Withholding Estimator only takes a few minutes to complete and will help you know if you need to make changes,” De Haan says.

You may find other potential savings from tax credits and deductions. Read “How to keep more money this tax season? These 10 tips can help.”

“The other key thing to think about is what changes have happened in your life, or will happen in 2022, that may require you to rethink your tax strategies,” De Haan says. For example, are you retiring this year? Paying off your mortgage? Did you experience divorce or death in your family?

Taxes are complicated, and everyone's situation is different. Consult your tax advisor before you make any final decisions.

Next steps

  • Visit the IRS website for detailed information on when, where, and how to file.
  • Expecting a little extra cash in the near future? Log in to check on your retirement savings and adjust your contributions as needed.

1 IRS Returns Filed, Taxes Collected & Refunds Issued, Fiscal Year 2020

Links provided to small business article and NerdWallet are provided as a courtesy and not a recommendation of these applications.

TurboTax, H&R Block, TaxAct are not an affiliate of any company of the Principal Financial Group®.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel, financial professionals, or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities are offered through Principal Securities, Inc., Member SIPC. Principal Funds Distributor, Principal Securities, and Principal Life are members of the Principal Financial Group®, Des Moines, IA 50392.

Tyler DeHaan is a Registered Representative of Principal Funds Distributor, Inc.