Everyone wants to save money on their taxes—and now that the year is winding to a close, now is the time to get a jump start on your tax planning. Remember- getting started sooner than later can help minimize what you’ll owe to Uncle Sam.
For example, if you’re filing as an individual, now is a great time to schedule an appointment to talk with your accountant or CPA. Not only can they help bring you up-to-date on recent changes to the tax code, they can help you understand how to maximize your retirement account contributions. Maximizing your contributions before the end of the year can help reduce your adjusted gross income (AGI), which in turn, can help lower your tax liability.
Your CPA can also help you estimate your 2022 income, which can be especially important if you expect to receive one or more 1099-MISC statements, a 1099-DIV, 1099-G, 1099-IND, 1099-R, and/or 1099-SA. If you do have self-employment income, your CPA can also help you understand what documents you’ll need to start gathering if you plan to file a Schedule C.
(If a significant portion of your income is self-employment income, be sure to ask your CPA about the benefits of setting up an S-Corporation. Depending on your income level, this could save you money come tax time.)
Other tax planning strategies (in addition to maximizing your retirement account contributions) may include participating in a deferred compensation plan (this is something that may be beneficial to highly-compensated employees), accelerating certain medical expenses and charitable contributions, and setting up (or adding additional funds to) your child’s college education savings account (via a 529 plan).
Lastly, your CPA can also advise you on the various tax credits you might be able to take advantage of, including:
- Earned income credit
- Adoption credit
- Child tax credit
- Education credits
December 31 is fast approaching, which means that if you haven’t started tax planning yet, this is something you’ll want to get started on. This can be especially important if you’ve had significant changes to your income since the close of 2021.
For more information on tax planning strategies, how to minimize your tax liability, and how to start preparing documents now in advance of your 2022 tax appointment, we can help. Call Hughes, Snell & Co., PA today to speak with an expert. What are you waiting for? Call our office now to get started.