As fall approaches, we look forward to the holidays. After eating Thanksgiving turkey and Christmas ham, we savor the promise of spring, only to be reminded that 2017 income tax filing season will soon be upon us. For many people, the act of filing their tax returns creates significant upset and anxiety. Here are some planning tips to help you order your ducks.
- Summarize your business income and expenses; Gather your receipts to support your spending. If you start now, the process will be less stressful and the risk of missing one or more tax-deductible expenses is significantly reduced.
- Summarize your cash and non-cash charitable contributions.
- If you have investment positions with ongoing losses, consider the tax effectiveness of reaping those losses before the end of 2016.
- Document any changes in your financial picture during 2016. For example, taking on business debt, buying new business assets, buying a new home, selling investments or other assets, etc.
- Consider your need for professional income tax services. If necessary, hire a tax attorney or income tax professional, depending on your situation.
- Schedule a tax planning appointment with your tax professional. A tax planning consultation produces strategies that specifically address your circumstances. With three months left in the year, there is plenty of time to implement tax planning advice and minimize your tax liability.
- If possible, increase your retirement contributions. This will help grow your savings and lower your taxable income.
- Make a regular extra payment on your mortgage; This will help you pay your mortgage, lower your long-term interest expense, and lower your taxes in the short term. However, it is important that your mortgage provider tells you that the payment is not for additional principal. Making an additional principal payment will achieve the long-term interest reduction, but the tax benefit will be lost.
- Clean out your closet and make charitable donations. Charitable contributions are tax deductible, and more importantly, these donations help organizations like Goodwill create jobs for people with disabilities.
- Although flexible spending accounts now have a rollover feature, make arrangements to use any excess balance in these accounts.
- If you haven’t already done so, make any estimated tax payments due. Failure to make estimated tax payments can result in penalties and could leave you facing a much larger tax bill on April 15.