The holidays are hot on our heels, and we all know that this can be an exceptionally busy, stressful and chaotic time of year for everyone, even more so if you’re a business owner or are self-employed.
That in mind, it’s important to ensure that you give yourself enough time to plan for your taxes and make the most of strategies to reduce the amount you will need to pay.
Festive tax planning:
Taking a proactive approach to tax planning, may not be the first thing on your mind over the festive period, but it probably should be. Meeting with a CPA or tax specialist is advisable in the fourth quarter, and will give you a much more informed idea of how your businesses year may be about to end.
Prevention is the key, and planning for your taxes early enough can ensure that you don’t get hit with taxes on contributions and/or expensive penalties. Doing so also enables you to make changes wherever necessary, and your tax professional will recommend them provide they have ample time to process the relevant information.
If you want to make the most of any possible deductions, contributions must be made before December 31st for them to be included in that years’ tax return, as after the first day of the new year, deduction options become significantly reduced.
Other festive tax strategies:
If your income is lower than expected, then there may be some other tax strategies which can be used to maximize your deductions. Strategies that enable you to make significant tax savings in the event of your retirement – such as converting a traditional IRA to a Roth IRA – require you to pay income tax on the converted amount, and this is best done within a year that you are in a lower tax bracket. Converting in such a way, must occur before the end of December, again highlighting the importance of festive tax planning.
If you’re self-employed, proactive tax planning is especially important, as it enables you to see if the estimated tax payments that you’ve made during the year, are going to be enough.
Assuming your taxes will be the same this year as they were in the previous one, can set you up for a fall, and with changing tax codes, it’s vital that you don’t let the seasonal festivities get in the way of your tax preparation and planning. Review your income and expenses well in advance of December, to ensure that you don’t miss out on any opportunities to save some money. One of the best ways of making sure that your taxes work in your favour, is by using the services of a professional tax preparation and planning company, who could very well end up saving you money that you’ll be grateful of in the new year.