5 Tips for Getting Ahead Next Tax Season
These simple steps can save you time and energy each tax season, and maybe even help you avoid some unpleasant surprises.
1. Organize now to reduce work and stress down the road.
We know it’s not always fun to pull together your tax information for us each year. So here’s an idea that may help. Make this the year you FINALLY set up a streamlined, year-round system for filing receipts, tracking expenses, making estimated tax payments, and managing other important information you need. There are all kinds of tools and supplies out there to guide you. Sometimes the best approach is the easiest—manila folders clearly labeled with each category that we ask for in our Annual Planner. If you file things immediately throughout the year, you’ll easily find them next spring.
2. Keep an eye on the big picture.
Each year, especially if you’re self-employed, your tax burden can fluctuate depending on your income, the sale of a home or stocks, major expenses, and other financial changes. For example, if you’re making estimated tax payments each quarter, they may be based on the assumption that next year will be the same as this year (what we call a safe estimate). But by now, your picture may have changed quite a bit. To avoid writing a bigger tax check next spring (or even facing a penalty!), have us evaluate your mid-year income and tax status now to make sure you’re on the right track.
3. Determine if your withholding needs a tune-up.
If you have too much money withheld from your paychecks, you’re giving the government the use of your money all year until you get a refund. Why not keep that money for yourself? On the other hand, if you end up writing a big tax check each spring, you may not be having enough withheld. A simple adjustment now can make all the difference.
4. Take advantage of your retirement funding benefits.
For many, retirement funding is the last priority because business or living expenses get in the way. It’s not as tough as you may think to contribute to retirement plans, and the benefits are tremendous for a more secure future. Let us help you look at your financial picture to determine how you can set aside money this year and make the most of an IRA, 401(k) plan, or other retirement fund.
5. Consolidate your debt.
If possible, replace your high-interest credit card debt with a lower-interest home equity loan. Why? Because you may be able to deduct the interest on your income tax return.
Our financial articles are presented by Honeck O’Toole, Maine certified public accountants. If you’d like help in reducing your tax burden or tracking your annual financial picture, email us or call 207-774-0882.