The Best Time to Start Planning for Your Taxes is Now
There are less than three months left in the year. Think that means six months before you have to think about your taxes in March or April? Think again or be ready to pay the price.
1. Avoid Surprise Bills and Estimated Tax Penalties
Tax reform was called the Tax Cuts and Jobs Act, but thanks to the end of certain deductions and credits, there are still situations where you may see a tax increase. That’s in addition to normal annual swings in your income and expenses, changing eligibility for deductions and credits, and other moves that affect your tax liability.
Would you be ready for a four or five-figure tax bill? IRS interest rates are up to 5% (and increasing as the Fed rate increases) for underpayment of estimated taxes. Add on 0.5% per month in failing-to-pay penalties if you don’t pay by your filing deadline. To avoid these costs, figure out what you’ll owe now and make sure your estimated tax payments cover it.
2. You May Need to Make Moves Before the End of the Year
Remember that even though you have until March or April to file your taxes, your tax return says what you did between January 1st and December 31st. Once the clock strikes midnight on the new year, your money-saving options are limited.
Check now for year-end moves like shifting income, planning expenses, starting retirement plans, ensuring you’re eligible for deductions, and more.
3. Get Your Books Ready
Your CPA’s job during tax season is to make sure your taxes are done correctly and to check for any tax law provisions you can take advantage of. By this point, your books should be about 90% complete minus any complex or unusual transactions you weren’t sure how to handle.
Want your CPA to dig through your boxes of receipts? Be prepared to pay full CPA hourly tax preparation rates for the time it takes to get everything in order.
Want to save money? Talk to your CPA before the end of the year about ongoing bookkeeping services or QuickBooks setup and training.
4. Avoid Extending: Get Tax Season Over With and Avoid Interest
The only thing worse than waiting until March or April to worry about your taxes is extending until September or October. Yes, you can skip failing to file penalties, but that’s about the only thing in your favor.
Many tax moves still need to be made by either the end of the year or your original filing deadline. In addition, there is no extension of time to pay. If you wait six months to file and find out you owe money, you just paid an extra six month’s worth of interest.
Unless there’s a reason you absolutely can’t file, get it done as soon as possible.
5. Start Budgeting For Next Year
In addition to your upcoming tax deadline, you also need to think about next year’s budget.
? How will you cover any amount due on your current year tax return, and will the cash outflow impact your operations?
? How much cash do you need to set aside in January, February, March, and April to cover next year’s estimated tax payments?
? When you’re considering your year-end tax moves, will the tax benefit be greater this year or next year?
To figure out the answers and make sure you’re ready for tax season, contact us right now to schedule a consultation.