Sunday, October 18, 2015

Why you should contact your Tax Accountant now!

It's October, and I've been thinking about my potential tax bill.  You may find it strange that I am thinking about it now, when the calendar year hasn't even ended yet, but actually, now is the perfect time to consider it.  Let me explain.

If you have had an increase in your income in the past year, you may find yourself in another tax bracket.  Also, if you've had any "life changing" events, it could also impact your tax situation.  My situation is that my income is higher.  While I have enjoyed the higher income this year, I realize that it could make my tax situation drastically different.  Typically, I get money back, but this year it could be different.  So, I am going to contact my accountant.  

October 15th is the date that taxes are due for people that filed extensions.  Wait until after that date by a week or two in order to contact your Tax Accountant because they may be very busy right around that date.  If you have experienced any of the following:  income increase, inheritance, property sale, marriage, added dependent, less dependents, divorce, or other life changing event, you should consider checking in with your Tax Accountant  sometime in the next month.

Your tax professional can  help you assess whether or not you will owe the government come tax time.  It will be an estimate, but a fairly close one.  There are a few things that can be done during the course of the remainder of 2015 to help you minimize any potential tax bill, but first you have to know if you are in that situation or not.

The first step might be to make some transactions that make your Adjusted Gross Income (AGI) lower.  You see, your Gross Income is the amount you are being paid before taxes or any other withholding are taken out.  Your AGI, is the amount that the government is actually taxing you on.  The lower your AGI, the smaller the amount you are responsible for in taxes.  After that amount is set, there are an additional series of things that you get credit for.  These "credits" go toward your tax bill, lessening the amount you actually pay to the IRS.  Your tax accountant might tell you to donate more to a charity, contribute to a traditional IRA, tax-deferred annuity contributions, health savings account contributions, maximize any educator expense deduction, and several more.

The point is, if you've had an event that could change your tax picture, contact your preparer or accountant.   Your email should basically go something like this:

"Dear so-and-so, I wanted to check in with you before the end of the tax year.  I have had _____________ event come up this year, and I am not sure how it will change my tax situation this year.  Is there anything that I should do before the end of the year in order to plan accordingly?"

Then, they will have a few questions (most likely), after which you will have a solid game plan to complete within the calendar year.

Of course, there is one additional thing to be prepared for...  Paying the preparer.  It is possible that if it is just a quick check in, that they may not charge you, but if your tax planning takes them some time, you may have to pay a fee.  Don't let that possibility detour you.  Tax planning can save you a good deal of money.  Even if you have  fee for the consultation, the information is too valuable to pass up.

Until next time,
Happy Planning!

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