Common Questions About End of the Year Tax Planning

I know, the holidays are upon us, and the last thing anyone is thinking about is tax season. But as New Year’s creeps into view, this is your last chance to make money-saving moves for your taxes.

1. Why should I start planning now?

Most taxpayers do not plan ahead for the coming tax year, simply because they do not want to start stressing about taxes during the holidays. However, choosing to plan ahead will actually make things easier and less stressful come tax season. You should look at tax planning as a stress-preventative measure.

2. What are the advantages tax planning?

Besides reducing stress, end of the year tax planning can also save you a lot of money. Tactics like making an extra mortgage payment or paying state taxes in advance can quickly and easily reduce your tax liability. If you wait until the New Year begins, it will be too late to take advantage of these strategic tax moves.

3. What tools do I need for end of the year tax planning??

Year-end tax planning does not need to be difficult, especially if you have your financial documents organized. You should also get a copy of your tax return from last year as well as a calculator and pencil. It is also a good idea to have access to a computer with Internet so that you can research deductions and credits.

4 Should I defer income?

One common tax planning strategy is to defer income you are allowed to claim in next years return instead of the current year. The advantage is that you can avoid having to pay taxes on the income this year, but remember your will have to pay taxes on those funds next year. Additionally, only self-employed taxpayers or independent contractors usually have this option.

5. Can I e-file an overdue return?

If you have still not filed your tax return from last year then you should do so as soon as possible. Unfortunately, overdue returns cannot be e-filed, and must be prepared in writing and mailed in.

6. Will purchasing an energy star appliance lower my tax liability?

If you make a qualifying upgrade to your home (such as a new water heater, or dual pane windows), you may qualify for a federal tax credit. Depending on what you purchase and how much it costs, you could save up to $1,500. For information about qualifying upgrades check out EnergyStar.gov.

7. Should I make extra contributions to my 401(k)

Making extra contributions to a retirement account is a great end of the year tax planning strategy to ensure a reduction in your taxable income.

8. Can I deduct medical expenses?

You can only deduct medical expenses that total more than 7.5% of your adjusted gross income. While you are working on your end of the year tax planning you should find out exactly what percentage of your income has been spent on medical expenses. If you are just shy of the 7.5% then you could benefit from making a few additional purchases at the end of the year so that you can claim the deduction.

The Tax Lady Roni Deutch and her law firm Roni Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight tax debts on your behalf.