It can be easy to put tax planning on the back-burner when tax laws are constantly shifting and seem too complex to decipher. But it’s time for no more excuses when it comes to lowering your tax bill.
Here are the top five reasons that people avoid certain tax situations along with tips on how to stop procrastinating and start paying less taxes this year:
It won’t make a difference. This excuse is especially problematic in years with unique situations or life events. Selling a house? You can avoid taxes if primary residence requirements are met. Starting a business? Choosing the correct entity can save you a bunch of taxes. Getting ready to retire? Properly balancing the different revenue streams (part-time wages, Social Security benefits, IRA distributions and more) has a huge impact on your tax liability. Even in uneventful years, external forces like new tax laws can be managed to your advantage if planned for in advance.
It’s out of my control. Timing is important when it comes to minimizing taxes, and the timing is often in your control. Bundling multiple years of donations into one to get a deduction, holding investments over one year to get a lower tax rate, and making efficient retirement withdrawals are just some examples of prudent tax strategies that you control.
There’s not enough money involved. There are tax strategies to be implemented at all income levels, not just those at the top of the tax bracket. Tax deductions are available for student loan interest, IRA contributions and others even if you claim the standard deduction. Certain tax credits, called refundable credits, will increase your refund even if you don’t owe taxes. Missing any of these tax breaks can unnecessarily increase your taxes.
I only need help at tax time. When the standard deduction doubled in 2018, many people assumed they could kick their feet up and wait for a big refund. That assumption proved to be false for a large number of taxpayers when their refunds came in lower than expected or turned into a tax bill. Don’t let this happen to you! Every year has it’s own set of changes and challenges that you should plan for well before tax time rolls around.
It’s too overwhelming. Tax planning is often as simple as looking for ways to reduce taxable income, delay a tax bill, increase tax deductions, and take advantage of all available tax credits. The best place to start is to bolster your level of tax knowledge by asking us for assistance.
Thankfully, it’s not too late to get on track for 2019. If you need to schedule a consultation to plan your annual tax strategy, now is a great time to do so. Contact us to get on our calendar.