Sometimes surprises are good, just not often the ones that come on April 15th each year. Yet year after year people fail to properly plan or save for what may come due on that fateful date. There are two main points to remember when it comes to your taxes. First, it’s never too early to start planning. Secondly, adjustments to withholding or estimate payments are easily accomplished.
As we face the new year, now is the time to sit down with your tax advisor to take a look at your potential bill for next April. Bring your most recent pay stub (plus that of a spouse, if employed), information about any changes to your lifestyle (bought/sold a house, added/lost a dependent), and a copy of your prior year’s return if you are changing tax professionals. All of these items will aid a tax preparer in estimating the amount of money you may owe the IRS.
After getting an estimate of your tax bill, go ahead NOW and adjust your withholdings, save, or execute tax reduction strategies. Your employer can provide you with a new W-4 so that you can contribute additional amounts from your paycheck. If you are a disciplined saver, setting up a CD or savings account specifically for your tax burden may be a better choice. There is also time to open tax reduction vehicles, such as an IRA or college savings plan, many of which allow deductible contributions all the way to the April 15th deadline. Your tax professional can help in these decisions and provide you with the pros and cons of each plus detailed information on how they operate and what your liabilities and benefits might be.