Tax Season is Over. Your Tax Planning Shouldn’t Be.
You may only file a tax return once per year, but taxes affect you year-round. Begin planning for next tax season today by reviewing your tax return and refund (if you received one). Your tax professional can help you make adjustments today that will benefit you in the most tax advantageous way come next tax filing season, including by addressing your withholdings, retirement contributions and deductible expenses.
Check Your Withholdings
Did you owe more than you expected on your 2018 taxes or, in contrast, did you receive a large refund? These scenarios could indicate you may not be claiming the appropriate allowances on your W-4. If you are unsure of how many allowances you are claiming, you can check with your Human Resources department, and if you aren’t sure how many you should be claiming, the IRS has a Withholding Calculator that can help. You can change your allowances at any time by submitting a new W-4 to your employer. In fact, the IRS encourages individuals to complete a new W-4 each year and especially when your personal and/or financial situations change.
Note: The IRS is currently updating the W-4 form for 2020 and is accepting comments. The new form will have a new design that they hope will provide simplicity for employers and employees as well as promote accuracy and employee privacy. For more information and to view the current draft, read their full announcement.
Fund Your Retirement
Whether you have a 401(k) through your employer or an equivalent retirement plan, it’s a smart idea to review your retirement account contributions at the same time as you review your W-4. Contributing to a traditional retirement account is tax-free so can reduce your taxable income for next year’s tax return.
Track Your Deductible Expenses
This is especially important for individuals who are self-employed and those who frequently deduct travel, office and business-related costs. However, there are several deductions that anyone can qualify for and should track including medical expenses that exceed more than 10% of your adjusted gross income (AGI) or your charitable contributions. You must have paperwork to back up these deductions, so it is helpful to keep a folder for your receipts and paperwork related to deductions.
Tax season is not typically viewed as an enjoyable process, but with a little planning, it can be a much easier one. By addressing your tax situation today, you can avoid unpleasant surprises when you file your 2019 tax return. If you have questions about how to better prepare for your 2019 taxes, contact a member of our Tax Team.
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