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Are you really doing a good job with tax planning?

Unless you have filed an extension, everyone’s personal tax returns were due April 15th.  So this makes now a great time to assess your tax situation so you can make adjustments to improve your tax situation for 2015.  We really should never just have tax planning on auto pilot.  Financial circumstances are always changing and most often, these changes have an impact in our tax situation.
 
What is one of the biggest reasons to consider making a tax change for 2015?
The most common indicator of the need to make a change in your tax planning is if you received a substantial return or had to make a significant payment.  Either is a key indicator that you might need to make a change in your tax planning for 2015 because you should always plan to be about even when you file your taxes.  Getting a large return is nice, but wouldn’t it be better have more money each month?
 
What would be possible changes if you had a large return or made a big payment?
There are several actions to consider including: make a change in the amount of taxes withheld from your paycheck by updating your W-4 appropriately; starting or increasing your 401k contribution or other tax friendly retirement savings; or, putting more money in your Health Savings Account.  All of these will have an impact in your tax refund or tax liability at the end of the year.
 
What are other reasons that would indicate we need to change our tax strategy?
Major life events are another reason to review your tax plans.  If you are having a child, getting married, buying a home or retiring in 2015, there could be tax changes that you want to consider given your new financial circumstances.
 
What changes are driven by major life events?
Changes due to life events can include:  how much you need to have withheld from your paycheck; the opportunity to take advantage of additional tax incentives or deductions that would lower your tax liability; or, it could even trigger the need to take other financial actions such as selling investments or making charitable donations.  Life events almost always have a tax impact and should be part of your annual tax planning efforts.
 
How much can children impact your taxes?
The addition of children can create several opportunities.  Kids open up additional tax deductions and tax credits that might impact the amount of taxes that you owe.  Plus, considering an investment in a 529 plan would be one of the major financial decisions to consider that creates a tax benefit. 
 
What about healthcare and childcare considerations?
Yes, these are two other important changes.  One might want to increase Health Savings Account deductions to cover the increased medical expenses of having children. The other consideration would be opening a flexible spending account for childcare expenses.  Both have important tax implications and can be very beneficial so delaying them would be a tax mistake.
 
What should our goal be with our tax planning?
Legally pay as little in tax as you can by making sure that you are fully taking advantage of all the tax deductions and incentives that are available to you for your unique situation. Working with tax professionals is always a smart move in making sure you are maximizing your tax avoidance strategies.


Posted: 4/15/2015 with 0 comments

Categories: Money Matters, Planning, Taxes



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