We all know that 2014 is just about over, which means soon we’ll be watching that big crystal ball drop in Times Square and kicking of another new year. A new year means new goals and resolutions, which can cover just about every aspect of our lives. Of course, taxes are among the many things you can focus on right now, but it’s not just this year’s taxes that need your attention.
Save Now and Next Year
2014 is almost gone, but you still have a few days left to make some last minute deductions to enhance this year’s return. One of the best ways to save money on your taxes is to find some last minute deductions before the door closes on 2014. One great way to do this is to contribute more money to a pre-tax retirement plan, like a 401K. Making charitable donations is another effective way to add your deductions. Plus, you can always save on your capital gains by selling off any other stocks that haven’t performed so well, which can help offset your gains.
Never Too Early to Start
Now that you have some ideas for this year, what about preparing for 2015. That’s right; it’s never too early to start preparing for the next year’s taxes as well. In fact planning ahead right now for 2015 can make the end of next year a lot easier to prepare for when the time to tax plan comes again next December.
Check Your Financial Inventory
One step you can take is to get an inventory of your financial situation, which can help you set up your investments the best way possible for 2015. Getting together with your financial planner and advisor and reviewing your tax planning and retirement funds can be a big help.
What’s Your Effective Tax Rate?
Although you may know which tax bracket you fall into it’s also a good idea to figure out your effective tax rate, which is the percentage of taxes you pay each year out of your total income. By being familiar with your effective tax rate you can be in better position to make important retirement decisions. For example, should you allocate money in a traditional pre-tax 401K before the year is over or should you instead use an after-tax Roth account?
Have Any Withholding Issues?
Once you’ve started to get a better picture of what next year will look like you might find that you’ll owe taxes in that year. If you think you might fall into that category, then why wait; go ahead and run your numbers now with the help of an experienced tax professional like GROCO. If it looks like you might owe money, then you can make the needed changes to your withholdings before the New Year begins. This can help reduce next year’s tax bill. On the other hand, if you expect a large refund, then decreasing your withholdings can mean you will have more income in your pocket throughout the year.
Don’t Wait Till Next Year
Whatever tax planning decisions you decide to make, just be sure you do something. By implementing these strategies you can not only help yourself for this year’s return, but you can get the 2015 tax year off to a great start as well. Contact GROCO for more information at 1-877-CPA-2006 or click here to contact us online.