For many people, just hearing the word “taxes” is enough to make blood pressure soar. We’re in the final stretch now for the 2016 tax filings, so it’s too late to do much to make that process easier this year. However, there are some simple things you can do now that will help when it comes time to prepare and file your federal income taxes for 2017.
Organize, Organize, Organize
If you spent hour after frustrating hour this year trying to pull together the records for income and deductions, you may have found yourself thinking, “There has to be a better way.” Fortunately, there is. It will take some initial work to get yourself organized, but once you have a system in place, you’ll thank yourself come tax season next year.
If you’re self-employed, it’s critical to have a record-keeping system to organize your business income and expenses. Keeping receipts and invoices, and organizing them according to type (i.e. office supplies, insurance, postage, marketing, auto expenses, etc.)
Even if you’re not a business owner, you can benefit from a similar system. Create a folder where you can record/store documentation of all of your charitable gifting, including donations to second-hand charitable organizations, churches, charitable fundraisers, etc.
If you incur medical expenses that you think you may be able to deduct, keeping accurate, complete records throughout the year can save you a significant amount of time next year too. Document all of your out-of-pocket expenses including prescription and over-the-counter medications, co-pays and deductibles and any other payments made for health care this year. If you travel for medical appointments, you should also keep a record of the dates and miles driven, as well as travel expenses for such trips that may be deductible.
Don’t let this suggestion overwhelm you; if separating your expenses by type (charitable, medical) seems too onerous, at least start keeping all of your 2017 information in one file folder or large envelope. Then, next year, you’ll need to sort through those records, but won’t need to spend time trying to pull it all together. You’re less likely to miss deductible expenses when you keep accurate, complete records throughout the year too.
Planning is Power
If you’re not happy with the result of your 2016 tax filings, now is the time to take action. Use the information from your tax return, and talk to your tax and financial professionals to get ideas for lowering your tax obligation in 2017.
For some people, contributing more to tax-deferred retirement vehicles may be beneficial. For others, planning charitable gifts for the remainder of the year can help lower taxable income while having a meaningful impact on their community.
Business owners might realize tax benefits by establishing an employer-sponsored retirement plan, or by making an investment in a new building, new equipment or vehicles.
Because everyone’s tax situation is a little bit different, there aren’t any one-size-fits-all solutions. However, odds are good that a little planning now will lower your tax bill next year.
Look at Tax Withholding
Nobody likes learning they need to write a big check to the IRS to cover their taxes. If you found yourself in that situation this year, take a moment to adjust your tax withholding on your income. If you’re working for an employer who handles withholding for you, changing the number of exemptions will mean your paychecks will be a little bit smaller, but it can help avoid the pain of having to pay the IRS next April. If you take regular or periodic distributions from retirement accounts or annuities, you can change the tax withholding amounts on those distributions to even things out too.
If you find yourself instead in a position where you’re getting a sizable refund from the IRS, that may mean that you are actually having too much income tax withheld throughout the year. Adjusting your exemptions or withholding percentage can help adjust your income throughout the year so you’re not loaning money to the U.S. government over the course of the year.
France Law Firm can Help
Taxes can be a headache, but taking little steps now can make the process much less stressful next year. France Law Firm can help. For more tips and suggestions to help make tax season easier next year, contact France Law Firm in Tallahassee today.