As we move through the 2025 tax filing season, it’s crucial to be prepared. It is important to provide us with all of your tax return documentation, including income from all sources. In addition, consider potential retirement contributions before 4/15/2025. Here are three key areas to consider that will help us prepare your tax return timely, efficiently and potentially save you taxes.
1. Provide All Your Tax-Related Documents to Your CPA
One of the most important steps in the tax filing process is providing us with all the necessary documents to accurately prepare your return. Make sure to gather and provide the following essential documents:
- W-2 Forms from employers
- 1099s for savings interest and investment accounts. Some investment accounts still haven’t issued required 1099s
- Mortgage interest statements (Form 1098) and property tax bills
- Charitable donation receipts
- Business-related expenses for self-employed individuals
- Schedule K1s from publicly traded partnerships, which are starting to be issued
2. Report All Sources of Income, Including Second Jobs and Side Hustles
A common mistake many people make is failing to report all sources of income. Whether you have a full-time job, a side hustle, or freelance gigs, all income is reportable on your tax return—even if you don’t receive a 1099 or other tax document.
Many people assume that if they don’t receive a 1099-NEC or 1099-K from a client or platform, the income doesn’t need to be reported. This is incorrect and can lead to IRS penalties if unreported income is discovered. It is your responsibility to report income from 2nd jobs, freelance work, online business related sales, rental income and cryptocurrency transactions.
However, keep in mind you may deduct expenses associated with these sources of income so provide us with a list and amounts of these expenses so that we can reduce the tax associated with the income.
3. Reduce Your Tax Liability with IRA, SEP, or HSA Contributions
If you’re looking for a way to reduce your taxable income before the April 15, 2025 filing deadline, consider making contributions to a Traditional IRA, SEP IRA, or Health Savings Account (HSA). These contributions can lower your tax bill while helping you save for the future.
IRA Contributions:
- The contribution limit for Traditional and Roth IRAs in 2024 is $7,000 (or $8,000 if you’re age 50 or older).
- Contributions to a Traditional IRA may be tax-deductible depending on your income and filing status. Contributions to a Roth IRA are not deductible but have other tax advantages.
SEP IRA Contributions for the Self-Employed:
- If you’re self-employed or a small business owner, a SEP IRA allows you to contribute up to 25% of your net earnings, with a maximum limit of $69,000 for the 2024 tax year.
- These contributions are deductible, lowering your taxable income significantly.
Health Savings Account (HSA) Contributions:
- If you have a high-deductible health plan (HDHP), you can contribute up to $4,150 (individual) or $8,300 (family) to an HSA in 2024.
- HSA contributions are tax-deductible, grow tax-free, and can be used for qualified medical expenses tax-free.
Preparing for tax season doesn’t have to be overwhelming. By providing us with all necessary tax documents, reporting all sources of income, and making IRA, SEP or HSA contributions before the deadline, you can ensure a smooth filing process and potentially reduce your tax burden. If you have any questions, please feel free to call us at 307-577-4040. We are always here to help you.
