As the year winds down, you probably have a lot on your mind, especially with holiday preparations. The last thing you want to be thinking about is next year’s income tax filing, but taking some time to do some tax planning this month could have a big impact on the ease of filing and on how your tax liability turns out.
Before you do that holiday shopping, it is a good idea to estimate your tax liability. You’ll rest easier knowing your budget takes into account whether you’ll need to pay additional income tax when you do your income tax filing in a few months. It also gives you time to make tax-saving measures, such as contributing to a retirement account, making charitable donations, and paying medical bills before the year is over. While you can make an IRA contribution after the end of the year, if you plan to do a traditional to Roth conversion, it must be done by the end of December. Also, be sure to use up any funds you have in a medical savings account that may be forfeited at the end of the year, depending on your plan.
December is the time to look at your brokerage accounts to see where you stand on capital gains. If your gains are going to push you into a higher tax rate, it might be advantageous to sell poor investments.
If you have a small business, December may be the perfect time to make additional supply purchases, hand out bonuses to employees, or invest in office equipment or other assets to lower your tax liability.
If you would also like to know about any new income tax filing rules that you might not be aware of and would like professional tax planning advice to make your income tax filing go more smoothly, give us a call at Cathy E. Parker, E.A. Bookkeeping & Tax Service. We have more than 40 years of experience, so you can count on us to provide the advice you need.