By now you have most likely either filed your tax return for last year or you have filed an extension. In either case it's not too early to start planning for this year. Planning can both reduce your tax liability and avoid an unpleasant surprise when you discover the balance due on this year's tax return. The following are a few areas to consider when planning for this year.
Adjust Withholding (if applicable)
If your prior year tax return has been filed and you expect this year to be comparable to last year, you may want to review your withholding. If you received a big refund last year and would prefer to receive a bigger paycheck each pay period instead, reduce the withholding. However, if you owed additional tax, you may want to increase the withholding to lower the tax due with the return and avoid any underpayment penalties.
Verify All Estimated Tax Payments Have Been Made
If you don't receive a paycheck, retirement plan distributions or any other type of payment from which taxes can be withheld, you may be required to pay estimated tax payments to avoid paying penalties. Verify these payments were made and total at least 100% of the tax shown on the prior year return. If your prior year return has been filed, your tax preparer should have calculated the amount of the payments for you. If you have not yet filed your return, the amount can be estimated and the remaining payments can be adjusted when the return is finished.
Consider Life Events and How They Will Affect Your Taxes
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