Is there some year end tax planning you can do? Have you talked with your accountant regarding changes in employments, income, or your household? There may be ways you can save on your taxes and there are several reasons why now is a good time to call your accountant.
Estimates: If you are one of the many who pay estimated taxes now is a good time to discuss changes in your income and get a good idea if your estimates will cover your tax or if you should save more back to cover the remainder. In addition if your income has gone down for any reason it would be a good to discuss if you need to make the final estimated payment. With Christmas just around the corner, none of us want to think about having to come up with money for taxes, especially if your income is down. So check with your accountant to see if it is going to be needed or if it can be reduced.
Business Owner: If you own a business you may want to strategize with your accountant on the best way to reduce income. This is a tricky area. Nobody wants to pay taxes but you need to make sure your money is being used wisely and not just wasted. I like to discuss with my clients where they are financial and how much cash flow they have to determine the best approach. I hear of several people going to buy a new truck just because it can be a business write off, that may not always be the best direction to take. A write off does not give you a 1:1 reduction in taxes, so spending of money should deal more with what your business needs are and will be versus what the tax is.
Individual Taxpayers: Do you have something that has happened in your household this past year that you need to plan for? Take for example if you decided to purchase a home, or if you had a child, or what if you had a child leave for college or graduate college? These are all items that will affect your tax return. By meeting with your accountant you can determine if you have paid in enough taxes through withholding or estimates to cover these changes or if you should be saving for a tax due return. Other items that may be affecting your return this year are your dependents and their health insurance. If you are the person claiming the dependent you are responsible for making sure they have health insurance or there could be an additional tax on your return.
Unemployment: While none of us want to think of the idea of being unemployed this is a real concern for many. The tax implication of unemployment can also require some planning. Typically you can get the agency to withhold federal taxes on your unemployment payments but not state. Then when the return is due the state tax due can put an unemployed individual in even more of a bind. It is a good idea to discuss with your accountant early so you can save some of those payments for taxes.
New Employment: Did you get a new job or is this your first job after college? The W-4 you file for your employer determines what you will be paying in to the different tax agencies. I have received several questions on this form over the past year. Do you claim a allowance? Should you have extra deducted? These are items that should be considered in addition to what else you have on your return.
Accountant’s Schedule: This is also typically a slower time for tax professionals so meeting with them now allows them more time to focus on you and your needs. In addition they know what is coming when you are ready to have your taxes prepared so if you are missing information they will know to ask which will speed up the process of completing your return.
The take away from all of this information is, this is a great time to make some last minute changes financially that could save you money on taxes at the start of the year. You should talk to your tax professional for advice on the most effective way.
The Wassman CPA Services website and blog is meant to offer general information to our readers. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service. You should contact Wassman CPA Services for advice concerning specific matters prior to making any decisions.