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Why pay more Income tax than needed?

May 2,2014

Why pay more Income tax than needed?                                        

Act now to save 2014 Income taxes!

My sons’ grade school has a motto; “Actions not Words”

How appropriate for those who want to save Income taxes in year 2014.

Employees
  1. If you can afford to, maximize your 401-k contributions, maximize your medical and dependent care Flex accounts and Health Savings accounts. No one item is a home run, but tax planning for individuals is a game of singles. Be persistent and you can save thousands of Federal income tax dollars by participating in these pre-tax plans.
  2. Hopefully you are paying ALL of your medical and dental premiums on a pre- tax basis. If you are not, you are committing tax malpractice on yourself!  Check with HR if you are not sure.
  3. Please be careful to NOT pay any disability or wage continuation premiums pre-tax. That would make the benefit taxable when you are in desperate need of income. Pay the small amount of income tax when you are working and have a tax free disability benefit should you ever have the need. THIS IS A VERY IMPORTANT CONCEPT TO GRASP!  If you are not clear on this, discuss with your tax accountant or benefits person at the office.
  4. If you have encountered any life changing events, you will need to adjust your income tax withholding. (Marriage, Divorce, Births, Deaths, Buying a home)
Self Employed
  1. You can’t plan without accurate information. Are all of your accounting records up to date and reconciled? If not go no further until they are.
  2. Adjust your estimated tax payments to conform to your year to date income.
  3. If you are having a great year, accelerate large purchases into 2014 when the deductions will save a greater percent of tax. (BUT CONSULT with your tax adviser to be sure there are no other factors that contradict this strategy.)
  4. If you have not yet filed 2013 tax returns, do so as soon as possible, a successful business needs to focus on the current year, not what happened 5 months in the past.

If you have any large transactions, income, losses, gains etc, call your tax adviser, what could you be doing to maximize the situation to your benefit?

Tax planning is a year round process and now is the time for action.

 

May 2, 2014