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My Story: Tax Planning
contributed by Tom Blair
Year after year, the federal standard deduction for individual households increases due to inflation. The result: Fewer people are finding it worthwhile to itemize because they only sometimes hit the "threshold" between the standard deduction and itemizing. The solution is a bit of tax planning.
"Group" your deductible tax payments (i.e. property taxes, sales taxes on vehicle purchases, etc.) in one year and put them off every other year until the following year (like January 2nd).
"Group" your charitable contributions to the years you can itemize and then every other year thereafter.
When personal casualty losses are substantial (over 10% of your expected AGI plus $100), then is the very best time to see if you can also "group" other income tax deductions for the same tax year.
If your employer reimburses you for travel expenses, make certain you keep a detailed log of not only your business expenses but also your medical and moving expenses (if any). Your travel log may be worth its' weight in gold in tax savings if it is correctly done! Some folks actually find it practical also to combine a travel log and an appointment(s) book. This is very useful if the IRS ever has a question on a travel-related deduction. And it's extra useful if, like so many of us, you already have enough things to remember in the course of a day and find it smarter to actually write things down and avoid cluttering your mind with too much who, what, why, when, how, and how much in our busy lives.
If you own a small business, "grouping" can also help you reduce the tax bite in many instances, not the least of which is the IRC Section 179 "expensing" of qualified tangible property. In short, try to "group" your equipment purchases whereby you have the tax-saving option of "expensing" major purchases in years of "feast" to help you remain in business when things are not quite so great financially.
Right now is the very best time of year to review with your tax advisor what condition your condition is in! Estimated tax payments can be adjusted upward or downward as needed; your current year W-4 tax withholding statement to your employer can be "corrected" in the event of marriage, divorce, loss or gain of a dependent, loss or gain from capital assets sales, change of address, etc. The tax laws are not likely to change much more, and your tax advisor has more available time to see and discuss tax strategy with you now than during the late-year holiday season or the always-busy tax return preparation season (starting around January 15th and ending April 15th).
Now is also the very best time to not only plan and learn how to reduce the "tax bite" on your income and assets, but to also look into the various ways to "bullet proof" your net-worth and wealth from the threat of lawsuits and/or otherwise-potential confiscation (in whole or in part) of your acquired wealth by others (i.e. with revocable living trusts, pour-over wills, business entity setups (i.e. LLCs, S-Corps, C-Corps), etc.). Both your tax and legal advisor should be consulted in this, the fourth quarter, for best results and money-savings for this year (and thereafter).
"My Story" is a regular feature of The Dollar Stretcher. If you have a story that could help save time or money, please send it by mailto:MyStory@stretcher.com
Take the Next Step
- Get the biggest tax refund possible at Turbo Tax
- Get Organized! Find out what your employer reimburses you for travel expenses. Get a travel log, journal, or appointment book & write it down as you go.
- Discuss "grouping" your deductions with your tax advisor.
- Contact your tax advisor now to discuss tax planning strategies before the end of the year.
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Valuable Resources
Tax Relief Hotline (877) 283-8580
If you owe more than $10,000 in back taxes, this national agency will work with the IRS on your behalf to arrange offers in compromise, payment plans, innocent spouse relief, and relief from garnishments. Consultations are free.
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