While you might be tempted to put off thinking about your taxes until the New Year, meeting with a tax planner before then can be extremely beneficial. Keep reading to learn why you should meet with a tax planner before the year is over.
In the last month of the year, most people are swept up with holiday plans that will carry them through to New Year’s. However, amid all the hustle and bustle, it’s important to start thinking about what comes next—tax season. While you might be tempted to put off thinking about your taxes until the New Year, meeting with a tax planner before then can be extremely beneficial, potentially even saving you thousands of dollars in taxes. Keep reading to learn why you should meet with a tax planner before the year is over.
Take Advantage of Deductions
The majority of tax deductions must be acquired before the end of the year if you hope to claim them on your tax return. (The primary exception to this for individual tax returns is making contributions to your IRAs, which can be done up until the tax deadline, and still claimed for the previous tax year.) Many people simply take a reactive approach to deductions; they make their usual purchases and donations, and deduct whatever they qualify for. However, many people miss out on the opportunity to maximize the benefit from their deductions by not properly planning.
For example, let’s say that you donate several thousand dollars to the same charity every year. What if donating an additional $1,000 would reduce your taxable income enough to put you into a lower tax bracket? This could potentially save you more than you would be donating, and you’d be helping out a good cause in the process. Most people would gladly do this, but unfortunately, you wouldn’t be aware of those potential tax savings without sitting down with a tax planner before the end of the year.
Proper tax planning can also allow you to “bunch” your deductions, which can save you significantly on taxes over the years. Bunching your expenses involves putting off certain normal purchases and donations until after the New Year. For example, you could put off your normal holiday donation to your favorite charity until 2023, and claim the standard deduction on your taxes for 2022. Then, in 2023, you would make your normal donation around Christmas, thereby doubling the amount you’ve donated for that calendar year. This significantly increases your deductions so that you can reduce your tax liability. For many people, this provides a huge tax benefit, but only if planned for accordingly, with the aid of a professional tax planner.
Make Financial Decisions for Your Business
Business owners must make many important decisions about their business’s finances before the end of the year. This can include decisions about:
Far too many business owners take a very relaxed approach to these important decisions. While you may not notice the negative consequences of that approach, it does keep you from enjoying the benefits of a more structured, well thought out strategy. Examining each of these decisions and the impact they have on your taxes can help you to determine whether or not adding more expenses to your books is a good choice.
For example, if you know your company printer will need to be replaced in a few months, you have the choice of buying one now, or waiting until it fails completely. When you sit down with your tax planner, they point out that purchasing a new printer now would reduce your company’s tax liability and drop you into a lower tax bracket, making it most beneficial to purchase before the end of the year.
Schedule an Appointment Sooner
When you try to sit down with a CPA or tax planner during tax season, you might have a hard time finding a convenient appointment any time soon. Most accountants become incredibly busy at that time of year, and our appointments fill up quickly. By meeting with your tax planner before the end of the year, you can get an appointment time that better fits your schedule, meet even sooner, and reap all the other tax benefits mentioned above.
Contact Peacock & French CPAs to schedule a meeting with one of our CPAs. We’ll go over your finances for the year and help you make these important decisions regarding your taxes and financial situation.