Start Your Tax Planning Early
Don't wait until April to create strategies that can benefit you
Think that worrying about your taxes before April will gain you nothing but prolonged stress? Actually, planning your tax strategy early can help alleviate the stress of filing taxes altogether. Even better, it can help you save money and make the best year-end financial plans. Early tax planning will also ensure that you fully acknowledge and understand your financial situation, which can help you plan for the future in more ways than just tax preparation.
You need to make adjustments to your financial strategy early in the year in order to cash in on the best tax returns. Educating yourself about tax strategy is the first step. Knowing exactly where you can make the biggest deductions can help you divvy up your budget, which can affect your spending year-round.
Assessing your taxes before the end of the year is also a key money-saving strategy. According to Margot Brandlin of OWL Bookkeeping & CFO Services, you may want to "increase expenses and delay income," which can entail "paying your January mortgage early or prepaying for subscriptions to keep the tax money in your pocket for an additional year." She notes that you may want to take the opposite approach if you foresee that your next year will be more financially successful.
For those who invest in stocks or mutual funds, year-end tax planning is especially important. SmartMoney.com cautions that you need to sell and buy stocks and mutual funds in a smart way at the end of the year in order to save the most on taxes. Regarding this, they state, "If you have a few loser stocks that you wouldn't mind unloading, now is the time." Similarly, with mutual funds, "If you own appreciated mutual fund shares held over 12 months and are contemplating bailing out toward year's end, sell before the December dividend."
The end of the year is also the time to plan for your next year's contributions to 401(k) and flexible spending accounts, if you have them. If you haven't looked at your flexible spending account until you check over your records in April, you may find that you had leftover money that is now lost.
For all these reasons, it is important to plan your taxes far before April. A financial planner can help you make sense of your many money-saving opportunities, so please don't hesitate to give us a call.