Tax season is around the corner… A little planning before year-end can make all the difference.
Are we really talking about taxes again? It feels like just yesterday I was writing about how to track down your W-2 and how to avoid missing important deadlines for key tax saving opportunities. Well, since January is almost here, I want to (share a few tips to help you cruise through yet another tax season. The following list is not all-inclusive. Talk to your tax professional to ensure you are aware of all factors impacting your taxes.
* Update your mailing or email address with banks and other financial institutions. If you moved, changed jobs, or changed your email address, make sure you reach out to any institution that will be required to send you tax documents and provide them with your updated contact information to avoid delays with the delivery of important tax forms.
* Schedule a doctor’s appointment for December. What does your doctor have to do with taxes? A lot if you have a Flexible Spending Account. If you have any unused funds in your FSA, try to move some of your medical spend to this year. Schedule appointments you’ve been putting off or move up those you scheduled for next year to December of this year. This will allow you to spend the funds in copays and potential prescriptions in 2016 instead and as a result, give you the ability to use the 2016 FSA funds to cover the expense.
* Take note of major life changing events that happened in 2016. Did you get married? Divorced? Had a baby? All these events, if new in the current year, may impact your tax filing status and other aspects of your taxes. Although these may naturally come up during conversations with your tax professional, these are key to other tax planning considerations besides just the filing of your tax return.
* Begin gathering tax documents. Ok, it might be a bit early for this one, but I still need to remind you to do it. Set up a repository for your tax documents and put in there any tax documents you already received. For example, if you made charitable contributions this year, you may already have the documents to support it. Move those to this central location and keep adding others as you get them. This will help you get ready for the big day – the tax filing day.
* Speaking of charitable contributions… If you plan on making any more charitable contributions this year, now is a good time to do so. Don’t miss out on the potential tax savings these represent for your 2016 taxes.
* Set up a 529 Plan. If you have children or grandchildren and want to start saving for their college expenses, a 529 plan is a great option – speak to your Financial Planner to ensure this fits your overall financial strategy and goals. A 529 plan provides current tax savings at the state level (it may vary by state), and deferred tax benefits at the federal level if funds are used for qualified college expenses when your child attends college.
* Open a Traditional or Roth IRA. If you are within the applicable IRS income limits and meet other IRS requirements, you may be eligible to set up one of these retirement savings accounts. Both accounts offer tax benefits, in addition to potentially complementing your overall retirement saving goals.
* Schedule a planning meeting with your tax accountant. Now is a good time to do this. It might be easier for you to find time before you get preoccupied with holiday festivities and for your tax professional before he or she gets swamped with the load of tax returns expected during the first quarter of 2017. During this meeting, you will have the opportunity to discuss life events and any regulatory changes that may impact your taxes. You will also be able to ask all your questions without feeling as pressured by time as you would if you wait until the beginning of next year to have your first meeting.
As always, happy tax filing season!