As we approach the end of the year, it’s a good opportunity to engage in the process of tax planning by speaking with your accountant and other retirement planning professionals.
Tax planning can be instrumental in helping to reduce the total amount of money that you owe on your taxes. The prospect of reviewing your income taxes can be overwhelming for many, and this is especially true after the overhauled tax law that came into being towards the end of last year.
Now is an appropriate time to verify that you have considered all possible aspects of updating your financial and tax plan. First of all, review your withholding decision and update your W-4 if needed.
You can use line six on your W-4 to state an extra amount that you would like withheld from your account before year end. You can submit an updated W-4 in the future if you want to take that extra withholding out in the future.
You can use a calculator on the IRS website to identify where and whether or not your withholding decision has been appropriate based on your individual and family circumstance. Furthermore, discuss the estimates of your 2018 and 2019 income tax situation to avoid unwelcome bills from the IRS about balances that are due. Maximizing contributions to your available retirement plans is a common strategy used before the end of the year.
Additional contributions can be made for those people age 50 years or older and taxpayers can always explore their flexible spending account and figure out how to use these funds before the end of the year occurs. The new tax law doubled the standard deduction with more than 90% of tax payers now claiming that standard deduction, it will be important to discuss the tax planning options and how this affects you with your accountant and estate planning professional.