Now is the time to schedule an appointment for tax planning. When you are on the fence, here are some things to keep in mind:
- It can make a difference. This is especially true if you have a major event during the year. For example:
- Sell a house? You can avoid taxes if you meet the primary residence requirements.
- Open a business? Choosing the right company can cut your taxes every year!
- Are you preparing for retirement? Correctly balancing the various sources of income (part-time wages, social security benefits, IRA distributions, and more) has a huge impact on your tax liability.
Even in uneventful years, external forces, such as new tax laws, can be planned in advance.
- Put yourself in the place of it Steering. Timing is important when it comes to minimizing taxes, and timing is often in your hands. For example, bundling several years of charitable contributions into one year can provide the opportunity to itemize deductions. Holding investments for more than a year to get a lower tax rate and making efficient retirement withdrawals are other examples of prudent tax strategies that you control.
- There are tax planning options for every income level. There are tax strategies that need to be implemented at all income levels, not just the upper tax brackets. Tax deductions are available on student loan interest, IRA contributions, and others, even when you apply the standard withholding. Certain tax credits (called refundable credits) increase your refund even if you don’t owe tax. Failure to take any of these tax breaks could raise your taxes unnecessarily.
- There may still be COVID tax relief. While it is true that many one-time tax breaks were only offered for the 2020 tax year, there are still many COVID tax breaks in 2021. Some of these tax breaks include an expanded child allowance, an increased child and care allowance, the ability to roll forward unused funds to your flexible expense account, and charitable deductions that are available to all taxpayers, even if you don’t list your deductions.
- You have help. Tax planning is often as simple as finding ways to reduce taxable income, delay a tax bill, increase tax deductions, and take advantage of all available tax credits. The best way to start by building your tax knowledge is by picking up the phone and asking for help.
Fortunately, it’s not too late to get on track in 2021. If you haven’t already scheduled a tax planning session, now is a good time to do it.
– By Nancy J. Ekrem, CPA
DME CPA group PC
Certified auditors & management consultants
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