Proper tax planning will help reduce the amount of tax liability you have, keep you off of the IRS’ radar, and ultimately save you plenty of time, money and headaches.
With intelligent tax planning, you can avoid the sticker shock of a huge federal or state tax bill. You’ll know exactly where you stand well before April 15th.
Taxes are tricky and most people and businesses put them off until the very last minute. But procrastination is a huge mistake. If you hastily fill out your state and federal forms on April 14th, you’ll likely miss taking advantage of the deductions you could be benefiting from, or even worse, risk being in the red to the IRS.
You can plan ahead either on your own or with a tax planning professional. However, experts recommend seeking the assistance of a pro, as he or she will have the experience and know how to save you both time and money.
One of the most important steps is reviewing your previous year’s taxes line by line to catch any oversights. Go through with a fine-toothed comb to make sure you don’t miss anything. You will likely discover some unpleasant surprises in terms of money lost, but you’ll be better prepared to start the new tax year fresh. You can do this on your own, or better yet, with a tax planning professional.
In order to start saving money on your taxes, you need to reduce your taxable income through deductions. Here is a list of some key questions pertaining to deductible items. Think about these when working through your tax planning.
– What is my annual contribution to my retirement fund?
– How much are my charitable donations?
– Will I renovate my house to accommodate a medical expense (e.g. am I putting in a wheelchair ramp)?
– Do I have a Health Savings Account (HSA)?
– Have I paid dues to a union or similar professional organization?
– Do I have a home office/dedicated workspace?
There are also a number of unconventional write offs that you can claim as deductions, so keep track of any of the following:
– Any major medical or dental expenses that you incur during the year
– Money spent for any volunteer work including gas, lunches or dinners out, parking, etc.
– If you sell your home for a profit you can deduct a portion of it
You should always try to keep meticulous records and all of your receipts in case of an audit. The IRS has been known to audit as far back as six years, so the more detailed and comprehensive your records are, the better! A big part of tax planning is making sure that all deductibles are above board, giving the IRS absolutely no reason to look twice at your returns.
You should also start to calculate how much tax you will owe early to avoid any nasty surprises in April. If you’re being taxed too much for your assets, consider gifting some to your children or dependents. This is perfectly legal and non-taxable up to $14,000 per year. For people with large estates, gifting assets is a great way to minimize taxes.
Now that you have a good idea of what your deductibles are, check out your investments to make sure they’re not being unnecessarily overtaxed. Swap to smarter, lower taxed alternatives that will net you the same reward.
It’s a good idea to review your investments annually to make sure they’re working their hardest for you. Why not give them a thorough once-over when you do your tax planning? Also, if you own your own business or work as a freelancer, check out your retirement plan and make any necessary adjustments to make sure you’re on the best plan.
The whole idea of tax planning is to take a look at your personal and business lives from an eagle’s eye vantage point and reduce your taxable income or assets across the board. Make sure you review as comprehensively as possible. Do your due diligence and you’ll be pleasantly surprised by how much you can save.
The tax code is intricate and changes annually and to plan properly, it really helps to have a professional in your corner. Advanced Accounting is well versed in all federal and state tax nuances, rules and legal loopholes. We are passionate about being as up to date as possible and accurate in our work. We will eliminate or drastically reduce your liability, leave no stone unturned in documenting your deductions and make sure your taxes are flawlessly and comprehensively completed. We are committed to reducing your tax burden as much as possible.
Let the tax planning specialists at Advanced Accounting have your back when it comes to tax planning and save big next year.