It’s that time of the year again! Every year people all over the United States of America are planning. Planning for the holidays, planning year end goals, and planning for taxes! Ok. The last one is obviously not what everyone is doing in November and December.
The fact that people are not tax planning is a problem. A bigger problem I believe, is people do not know it is an option. I never heard of it before I started working for a CPA firm. My dad did not talk about it growing up and my college course on personal finance did not cover it. Why is this? All we know is tax day is generally April 15th and we have to file our taxes for the previous year by then. Period. Oh, and we hope to get a large refund (more on that in a later blog)!
Every year people either do their own taxes or have someone do it for them. Every year (at least they’re supposed to). Every year this is done after the year is over. The only things you can change after the year is over is contributing to your IRA (traditional or Roth) and contributing to your HSA. This can be done up until tax day or when you file your taxes, whichever comes first. What if I were to tell you if you plan ahead of time, specifically before December 31, XXXX , with a CPA or EA, you could have several options to reduce your taxable income? Would you do it?
There are a lot of ways to reduce your tax due, but you have to be proactive and plan before the end of the year. This is why tax planning and tax history is so important. The CPA firm I work for has a very robust tax software program that allows for precise planning. Various scenarios can be ran in order to get a better grasp of what the tax liability will be and ways to reduce it. I would advise everyone to contact their tax man or woman and ask if they offer this service. And if they do…..then do it! If they don’t…….get a new one!