Most of my tax planning occurs at the end of the year. But thinking about taxes at mid-year is when you should really start. This is especially true if your income appears to be increasing dramatically over last year’s. With five months still remaining, there is plenty of time to thoughtfully plan to reduce your taxes. Here are some things to do:
- Make an appointment to review your previous tax return with your preparer. If they don’t actively have a tax-planning procedure, you should find a preparer who does.
- File your tax return if you filed an extension. Remember, rushing around at the last minute is a great way to overlook deductions or make a mistake that will cost you money.
- Get organized. Ask any tax preparer, and they will tell you that organized taxpayers always end up paying less. I really don’t care what system my clients use. But my fee will be lower if they bring me organized records, rather than just dropping off a box of receipts at our office five days before the deadline.
- Improve your accounting system. Business owners who invest in having accurate accounting records not only pay less in taxes, they also have accurate information they need to increase sales and profits.
- If you are considering buying equipment or making improvements - take advantage of a tax deductions that may be scheduled to be eliminated.
- Implement retirement plans. Researching now allows you to choose what best meets your needs.
- Plan to deduct travel expenses. If the primary purpose of your trip was business, you can deduct the full expense. As always, documentation is the key. Plan your trip to maximize your deduction.
To get the most out of your mid-year tax planning, you will need to project your income and expenses. Then at the end of the year, all you will need to do is update your plan and implement it in order to save thousands of dollars.