09 Oct 5 Fall Tax Tips
5 Fall Tax Tips, So You Do Not Fall Behind on your Tax Prep
Fall season is officially here! Fall is generally well received, as the days get cooler and less humid (ever so slightly for us Floridians) and pumpkin spice-everything is in full swing. However, fall also begins the busiest time of year for many of us, as kids are back in school, holiday and family gatherings have commenced, and holiday gift-shopping can be a burden. This extra stress tends to cause important tasks to get tossed aside, causing procrastination and delays, which only adds more feelings of stress later in the year. To prevent additional stress in the future, an important task that you can accomplish now is organizing and preparing for April 15, Tax Day.
Preparing and filing for your annual income tax is not a task that most enjoy. However, by starting to prepare now, you will feel less stressed and overwhelmed this spring. Here are 5 simple Fall Tax Tips to keep you on track and help you to not fall behind this spring for Tax Day.
1. Compare Your Income to Last Year
Fall is a great time for an income projection because enough of the year has gone by to get good data, and, if there are any big differences, there is still enough time to do something about it before year-end. A helpful tool for tax planning is your tax return from last year. It will show you what income was reported from your job, your business, your investment portfolio, your rental income, and additional sources of income that you may have. Take each area of income into consideration and compare it to your projected income for the current year. You should be able to get a good indication of whether or not your income is up or down overall.
2. Adjust Your Withholding or Estimated Tax Payments
If your income is substantially different after comparing it to last year, it may be time to make an adjustment to your withholding. Adjustments can be made by changing the taxes withheld on your paycheck or by using a payment voucher to make an estimated tax payment. To determine how much you should withhold, it is best to reach out to your CPA – Certified Public Accountant. They can help you calculate your projected tax liability and if you are underpaid for the year, then you may need to make an additional tax payment and avoid underpayment penalties.
3. Max Out Your Retirement Plan Contributions
If you have an Employer Sponsored Retirement Plan, such as a 401k, you have the opportunity to reduce your income, thus reducing your income taxes, by maxing out your annual account contributions. For 2020, that number is $19,500 and an additional catch-up limit of $6,500 if you’re over age 50.
4. Make Charitable Contributions
If you itemize your deductions each year, you are eligible to deduct qualified charitable contributions from your income. These gifts can be cash or property, but extra documentation may be required depending on the amount and type of gift.
5. Hire the Right CPA for You
It is important that you take the time to carefully find the right accountant for you. And keep in mind that with improved cloud-based technology and online collaboration tools, most accountants can view real-time data at anytime and anywhere, so your accountant does not have to be in the same city as you. The right person will save you time and money year after year. To learn more about our accountants and accounting firm, visit www.kegacpa.com.
Tax season can be stressful, but it is always less painful if you are prepared and organized, and may even be rewarding if you plan and act proactively. Preparing now, while sipping your Pumpkin Spice latte, can make the process of filing in April go much more smoothly.
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Messina is the Firm Administrator at Kmetz, Elwell, Graham and Associates and a blog contributor in the accounting and HR industries.