As the end of the year approaches, now’s the time to start preparing for filing your 2024 tax return in 2025.
When it comes to tax strategies, generally Dec. 31 is the deadline to make changes that might lower your tax bill. One major exception is the deadline for contributing to a Roth or traditional IRA: You have until April 15, 2025, to make a contribution to a Roth or traditional IRA for tax year 2024. If you qualify for deductible IRA contributions, then a contribution to your traditional IRA can reduce your taxable income for 2024.
Here are tips and strategies to prepare now for the 2025 tax-filing deadline.
1. Decide who will prepare your taxes
If you had significant changes in your life in 2024 — maybe you got married or divorced, started your own business, or had to claim unemployment benefits — your taxes may be more complicated.
As a result, you might need to hire a certified public accountant (CPA), enrolled agent (EA) or other tax professional to prepare and file your taxes. If you decide to hire someone, it’s best to start planning for that sooner rather than later. Waiting until the calendar flips to April could cost you.
The average fee for a professional to prepare and file a simple Form 1040 tax return, with no itemized deductions, is about $220, according to a survey by the National Society of Accountants in 2020-2021, the most recent data available.
But that amount rises quickly for more complex returns, and varies depending on where you live. For example, a Form 1040 with itemized deductions costs an average of $432 in states on the Pacific Coast, compared with $285 in New England.
No matter where you live, prices usually rise as the tax deadline approaches, so it’s smart to start searching for a tax pro soon.
2. Find ways to file for free
If you’re uncomfortable doing your taxes on your own and can’t afford a CPA, enrolled agent or other tax pro, or to pay for tax software, there are free options to consider.
The IRS currently offers three ways to prepare your taxes for free:
- With the IRS Free File program, the IRS partners with for-profit tax-software companies that offer free tax-prep software to eligible taxpayers so they can file their federal tax returns for free. Some taxpayers may also qualify for a free state tax filing, depending on the software provider. In January, the IRS will announce the income limit to qualify for the program for the 2025 tax season (for filing 2024 tax returns). For the 2024 tax season (2023 tax returns), taxpayers’ adjusted gross income (AGI) couldn’t exceed $79,000.
- The IRS also offers its Direct File program, a free tool that allows you to file your federal income tax return directly with the IRS at no cost. The program supports simple tax returns and is available only in certain states. Check to see if you qualify here.
- Another free-filing option is the Volunteer Income Tax Assistance (VITA) program. IRS-certified volunteers offer free basic tax preparation in person to people who earn less than $67,000 a year, are disabled or whose English is limited. The IRS has an online location tool for hundreds of free tax preparation sites in the U.S. (the locator tool is updated from February through April). Some VITA sites also offer online tax-prep assistance.
3. Create an online IRS account
Now is a good time to create an IRS online account. If you want to see your Form 1040 from last year, or you’re missing a prior year Form W-2 or mortgage interest statement, you can find your documents using this free tax tool.
Another benefit of creating an IRS online account is that it allows you to quickly obtain your prior year’s tax information without sitting on the phone for hours with an IRS representative, says Carl Johnson, a certified public accountant in New Orleans.
An IRS online account also lets you view your account balance and payment history for each year. You can also create a payment plan to settle your federal income tax debt within minutes.
4. Take your required minimum distributions (RMDs)
If you’re 73 years old and have enjoyed watching your 401(k) or IRA grow tax-free without touching it, remember that the IRS is going to want its share each year. That means you’ll have to make withdrawals — and pay income tax.
If you turned 73 in 2024, plan to take your required minimum distribution (RMD) at the latest by April 1, 2025. Read this IRS bulletin for more information.
The amount of your RMDs is based on your age and the year-end values of your retirement accounts.
5. Think long-term: Consider converting an IRA to a Roth
A Roth IRA has two big tax advantages over a traditional IRA: Qualified withdrawals are not considered income for federal (and usually state) tax purposes, and you don’t have to take distributions from a Roth every year once you reach age 73.
Converting a traditional IRA to a Roth IRA may save you money in the long run. Just know that when you convert an IRA to a Roth, it’s considered taxable income, which will raise your tax bill for that year. Generally, it’s best to convert to a Roth IRA when you’re in a low-income year.
6. Protect yourself from tax scams and fraud
As tax season approaches, many people start receiving phone calls, emails and texts from entities claiming to be the IRS. Be wary, and understand that these are scams.
Typically, the IRS will mail you a notice before using any other method of communication to notify you concerning issues with your tax return. The IRS won’t reach out via social media or text messaging.
Relatedly, the IRS warns taxpayers to be careful when choosing a tax preparer. Taking time to vet your tax preparer is crucial to protect yourself from tax scams and fraud.
Before hiring a tax professional, search that person’s name in the IRS database of federal tax return preparers to avoid dishonest “professionals.”
“Taxpayers should check the tax professional’s credentials,” Johnson says. Tax pros without credentials “may take questionable positions without any degree of scrutiny or fear of losing their access to the profession,” Johnson says.
7. Don’t ignore the IRS
Taxpayers who don’t file a tax return and owe a tax bill, or who file but don’t pay their tax bill on time, risk severe penalties. The IRS can even seize assets if necessary. Respond quickly if the IRS has been sending you letters because it found an error on your return or claims you owe back taxes.
Typically, the IRS will send you a notice if you have a balance due, changes were made to your tax return, or the agency needs additional information.
“If you ignore a collection letter from the IRS, you may face wage garnishments, liens, bank levies, and other adverse action. And in some cases, the amount due may increase for failure to respond,” Johnson says.
Keep in mind the IRS does offer installment plans and other payment plans.
Make copies of your correspondence and use only the U.S. Postal Service, the postmark from which is your proof of timeliness when responding. But whatever you do, don’t ignore the IRS because this may cause more issues in the future.
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