The time of year has arrived where we become a little less busy and life goes back to “normal.” School is back in session, summer vacations are in the rearview, and life just feels a little calmer.
At the same time, we are wrapping up the third quarter of 2019 and need to start thinking about preparing ourselves for the upcoming tax filing season. You may have had surprises in the past as a result of the new tax law…some good…some not so good. Now is a great time to begin doing some planning so that you can take action and be in control of your 2019 tax liability.
Tax planning strategies often include the timing of recognizing income, increasing deductions and taking advantage of tax credits to potentially reduce the amount of tax liability. Timely tax planning benefits you with managing cash flow and the elimination of fire drill decisions at the last minute.
Here are some common items you will want to begin gathering so that you can prepare yourself for year-end while there’s still time to have an impact on your ultimate tax liability:
- Pull out your most recent pay stub and note your year-to-date wages and withholdings.
- Speak to your financial advisor to determine the amount of dividends, interest and capital gains you expect for 2019.
- If you are a business owner, get your books and records up to date and reconciled. If that’s not your strength, or you just don’t have time, don’t sweat it. Gather up whatever you have and your CPA can help you with this. Now is the time to discuss any capital expenditures you are considering. How about children? Did they perform services for your business? If so, consider putting them on payroll which is fully deductible.
- For any rental properties, pull together your receipts and list out all income and expenses you have incurred during the year. What do you expect to have in the last quarter?
- Do you itemize your deductions? Charitable deductions, medical expenses and your primary and secondary residence may benefit you. If you do itemize, consider accelerating next year’s giving into this tax year.
- Consider any changes in dependents including children or other family members you may claim.
- Consider any other big changes in income, expenses and withholdings compared to the prior year. Did you retire from your job and begin to claim Social Security? Did you begin to take required minimum distributions from your IRA? Did you buy or sell real estate? All of these may impact whether your prior year’s return is a solid “starting point” for your current year expectations.
Once you have gathered as much of this information as you can, talk to your CPA. They may want to run tax projections, and will help you plan, take action and/or be prepared for any taxes that may be due next April. Taxes should never be a surprise!