Planning now will help next spring.
April 15 has come and gone, and it might be tempting to not give taxes another thought until next spring. But, as you probably learned while completing your tax return this year, a little bit of extra planning will save you some hassle when it comes time to do it all again. Here are some of the easiest ways to start preparing for next year’s taxes, plus some personal financial management tips that’ll help year-round.
Set up your system.
Whether you prefer high-tech financial management tools like digital vaults, smartphone apps and accounting software or old-school options like a box, an envelope and a spreadsheet, now’s the time to start sorting for 2015. If while completing your latest tax return, you swore that you would finally learn a new accounting system, starting it now will let you learn the ins and outs with less pressure. Or maybe it’s time to delete those apps you downloaded in January and admit you prefer to stick your receipts in a drawer. There’s no wrong answer — just pick a system that works for you.
Take your CPA to lunch.
You know all those last-minute questions you had for your tax preparer on April 14? Now’s the time to get them answered. Let everyone have a few days to recover, then set up an appointment to ask what you can do better next year. If pulling together your information was challenging for your accountant, make that meeting over a meal or another token of appreciation. If you had a less-than-ideal experience with your current accountant, this is an ideal time to shop around for one that’s a better fit.
Review your withholdings.
If your employer automatically withholds taxes from your paycheck, now’s a good time to make sure it’s taking the correct amount. If you only work part time, the withholding may have been estimated based on an anticipated full-time salary, and you’ve been paying too much. The same goes if you started a job midyear. “Look at balance due for taxes due this year and adjust your withholding. If you overpaid, why wait until next year to get that refund? Adjust it to get a little bit more in your paycheck through the year,” says Melissa Labant, director of tax advocacy at the American Institute of CPAs.
Re-evaluate your retirement plan.
Are you putting away enough for retirement? Maxing out a SEP plan or taking advantage of an employer match? The IRS limits on tax-deductible IRA contributions can change, as can the level of benefits an employer provides. This might be one of those questions you ask your CPA over lunch: Am I putting away enough to offset my tax burden?
Prepare an income projection.
Businesses prepare income projections to gauge their income and expenses. Labant says it can also be a helpful tool for individuals and families. “From July on, that’s all I really talk about; it’s a projection that looks at cash flow, estimated taxes for the self-employed, stock options, bonuses and other things impacting your income.” Labant says. “If you’re going to have a large balance due, as your tax preparer, I’m going to want to know that sooner rather than later.”
Create an account on IRS.gov.
If you haven’t already done so, this is a great time to create an account on IRS.gov. One of the benefits is you can download a transcript of your tax account transactions, line-by-line tax return information or wage and income for a particular tax year. Like the Where’s My Return? tool for tax refunds, which crashes during tax season due to heavy traffic, the IRS website should be easier to navigate after mid-April. And once tax season passes, there is less likely to be a long queue before reaching technical support.
Make a charitable giving budget calendar.
Charitable gifts are some of the easiest to overlook when it comes to itemizing deductions with year-end gifts, donations to thrift stores and those dollars here and there given away and forgotten. Rather than reacting to every fundraising campaign, make a plan that identifies when and where your charitable contributions will go. When you select and vet a few carefully chosen organizations, your charitable giving will be less likely to get away from you.
Plan for estimated taxes.
If you’re self-employed or have income that doesn’t have tax withheld from it throughout the year, you’ll need to pay estimated taxes quarterly. Have a great spring but a slow fall? You’ll pay a percentage of income for each, rather than a set amount throughout the year. Staying on top of your quarterly estimated taxes will help take some of the sting out of tax time. You’ll need your latest return, the estimated tax worksheet, current tax rate schedules and Form 1040-ES, Estimated Taxes for Individuals, all available on the IRS website.
Another tax season is just starting.
Filing your taxes will probably never be fun, but being proactive when you’re not under a filing deadline can help ease some of the burden and save you time and frustration when April comes again. Tax season might be wrapping up, but for smart taxpayers a new season is just beginning.
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8 Ways You Can Prepare Now for Next Year’s Taxes originally appeared on usnews.com
