Once per year, tax filing takes up an incredible proportion of your brain space until you e-sign and submit your tax return. After that, most people forget about their taxes until a refund check shows up in the mail (or gets deposited in your mailbox).
While this pattern seems reasonable for most people, there are a few things that you should do after you’ve filed your taxes.
And it might not seem like it would make a difference, but taking a few steps now can really set yourself up for the future. Here’s what you need to do after you file you taxes.
Make Sure Your Return Is Accepted By The IRS
The IRS “Where’s my refund?” tool isn’t used only to monitor refunds. You can use it to check whether your return has been received, or accepted, or whether your check is already in the mail. Sometimes, the status includes a “reference code” which may or may not require action on your part. This is a list of the most common “Where’s my refund?” status codes.
Tax filers can start checking on the status of your tax return within a day or two of e-filing your return. (If you chose to file via mail, you’ll have to wait four weeks to check).
Due to staffing issues, the IRS continues to report some delays for late filers, so a return may be in “received” status for a long time (in fact, there is still a backlog from 2021). However, the IRS typically works through the current year’s returns before picking up the backlog.
Correct Any Errors With Your Tax Return
Tax software can prevent clerical errors, but the IRS may flag certain issues such as incorrect business deductions or incorrectly claiming a dependent. If the IRS flags an error, you will need to correct the tax return by filing a 1040-X. Many tax software programs allow filers to amend their current year returns either for free or for an additional cost.
If you made a filing error, you’ll want to correct it as quickly as possible, so you can collect your refund (or make a payment plan). But don’t rush this step, especially if you think the IRS made an error. A company like Community Tax can help you figure out what went wrong, and they can help you correct the errors.
If Necessary, Figure Out A Tax Payment Plan
The first time you owe the IRS money, you may be caught by surprise. Most people receive small refunds for years, but they may owe the IRS due to a windfall or because they switched to self-employment.
When you owe the IRS money, you need to figure out a payment plan. The IRS payment plans can be a good start, but low-interest loans may be better for you. This article details what to do when you owe back taxes.
Adjust Your Withholding Or Quarterly Tax Payments
Most W-2 employees have taxes withheld from their paychecks. Typically, an employed person who properly fills out their Federal (and State) W-9 form will receive a small refund each year. However, some people end up with huge refunds, and others end up owing their state or Federal government money.
To correct this issue, employees will want to resubmit a W-4 form to their HR person. (Most states have an equivalent form). If you received a massive refund, you will want to claim more allowances than you’re currently claiming. If you owed money, you will want to claim fewer allowances.
Very high earners sometimes need to have additional money withheld each paycheck to ensure they don’t owe the IRS at the end of the year.
Self-employed people (and small business owners) typically have to stay on top of their tax payments through estimated quarterly tax payments. If you owed a large amount of money (relative to your income), you will want to increase the size of your quarterly tax payments next year. This can keep you from owing so much money at the end of the year.
Store A Copy Of Your Tax Return
It’s important to store a copy for a minimum of 3 years in all situations. You need to hold onto the records and the tax return for 7 years if you claim bad debt or worthless securities. If you owed money on your taxes, you need to hold onto the return for two full years after the debt is paid in full.
Holding files for three years allows you to file an amended tax return in the future in case you catch an error in your favor.
Most of our recommended tax software programs give users access to electronic returns for three to five years. However, software systems can change hands, and users might not be able to access records for weeks or even months. Don’t think this could happen to you? It happened at the start of this year when Cash App Taxes purchased Credit Karma Taxes.
Rather than rely on your software company to keep your records, download your return and store it in a cloud location (I prefer Dropbox, but other secure sites are fine). There’s no reason to print a copy of your tax return if you have access to it online.
Use Your Tax Refund Wisely
Some people earn small bonuses throughout their careers. Others receive an inheritance. But a tax refund may be one of the few financial windfalls that most people experience several times in their life. It can be tempting to use the money from a refund to pay for a vacation, or to put a down payment on a pickup. Before you spend the money, consider whether you can (and should) use the windfall to boost your bottom line.
A tax refund isn’t a gift from the government. It’s money you worked hard to earn. It makes sense to put the money to work for you, now that it’s back in your pocket.