This week saw the tax extension deadline of October 15th pass. That means you only have six months left before it is time to file taxes again on the regular April date.
Now I know that most of you read that and think six months means there is plenty of time before you have to worry about your tax situation. I also know, though, that there are many who should read that and realize instead that there is not much time left to make moves that can affect your tax picture.
This is the time to think of a critical question. Do you know what your tax return is going to look like when April comes around? If your answer is yes and you are happy with how things look, good job, carry on as you were. If you do not know, though, (or don’t like how things looked last year) it is time to start looking into things and avoiding unpleasant surprises.
Now sure, if your life and employment situation has not changed, then what your tax return looked like for 2018 will be a good approximation of what it will look like for 2019. You can know this without a deep dive. Small changes can make for big surprises, though. So even if you just got a significant raise at work, it can be worth getting the peace of mind that your withholding changed enough with it. Then there are the life changes - did you have a child, did you get married? Is your child no longer a dependent, did you get divorced? All of these will change your return.
Especially if you have had any big changes, though, that deep dive should come now while there is still time to make moves to change it. Did you start a new small business? Or are you running a small business that is now generating more income than before?
And remember, small business doesn’t mean that you left your regular job and started going at it completely on your own. Even joining the gig economy with something like Uber is “running your own business” in some ways as far as taxes are concerned. The money you make there has to be put on top of any regular income you made when it comes tax time. And in most cases, that money has not already been taxed.
Even if you are making some of this extra money and have thought about what its tax implications are, did you remember to include your spouse’s income, as well? This is all going to be made into one pile when it comes time to file your taxes.
Every year, we see clients who receive unfortunate news of how much their tax bill is. More often than not this is due to some changes in their situation that seemed small at the time, but loomed larger when they went into tax calculations. It is not the people making huge amounts of money who are surprised, but the ones in the middle, making some modest gains, who just did not plan.
Planning can hold off the shock of this. It cannot remove the fact that you need to pay some amount in taxes, but we can most likely lessen it some, and then plan for what you will need to pay. So if you do not yet have a handle on things, please contact us to look at your situation while there is still time to make a difference.
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