Tax Planning Strategies for 2016 – Don’t Delay
Don’t Delay – Begin Tax Planning for Next Year’s Taxes Now
I know, I can hear you saying “But I just finished filing my 2015 taxes, isn’t this a bit early?” Our response is No, it isn’t. All too often, we tend to put the dreaded topic of taxes off until the last minute, then it’s too late. None of us want any unpleasant surprises when we file our 2016 tax returns and that is why tax planning is so important.
The best time to get organized is now when we are more able to find current tax records. We’re going to give you five useful tips that will help you to get a leg up on your 2016 taxes. Tax planning software is also available to save you time.
- As any life changes occur, take immediate action. Some examples of life changes are the birth of a child or perhaps a change in your marital status. Either one of these can have an impact on your tax bill in a positive or negative direction. Adding another dependent would probably lower your tax bill and it would probably be a good idea to file a current W-4 with your employer to reduce the withholding on your pay check. Conversely, perhaps you may be in a divorce proceeding and will be filing a married separate tax return and will be having an increase in your tax bill. Adjusting your withholding may eliminate that surprise when you file your taxes.
- If you’re enrolled in the health Insurance Marketplace in 2016, you may need to report any changes in your circumstances. It’s usually best to report these changes in circumstances when they occur. If you report changes such as a change in income or family size as they happen, you will avoid an over-payment or an under-payment in your advance financial assistance.
- Maintain good records and keep them safe. You should have a permanent file containing a copy of your 2015 tax returns along with the following. All W-2 forms and 1099 forms as well as bank statements and other supporting documents. This would include, but not limited to, records of your family’s medical insurance coverage and other receipts and documents to support any itemized deductions. Keeping a good file such as this will help you later if you perhaps apply for a mortgage or bank loan or complete an application for college financial aid.
- Start now and get organized and keep it that way. You’ll be glad you did when tax time rolls around and you need to have access to these records. Instead of a frantic search for a certain document, you’ll be able to find it easily. All of this tax planning work now will make next tax filing season less stressful for everyone.
- If you’re using the IRS standard deduction when you file, you might want to consider itemizing. If you’re buying a home you’ll have real estate taxes and mortgage interest. Perhaps even a home equity line of credit. See if you medical expenses out of pocket are high enough to itemize. Look on the IRS website at irs.gov for a listing of the various medical expenses that qualify as a deduction. Make a list of the various charities that you have receipts for. Also, consider in-kind donations such as clothing, furniture, etc. The IRS website has good guidance in this area and you need to keep good, accurate records.
So, don’t put this important topic off any longer. Proper tax planning strategies now may allow you to reap rewards when you file your taxes next year.
Set aside the time and take that first important step to get organized now and perhaps have a much less stressful tax filing next year.