The 2016 tax season is already in full swing, in case you were not aware.? If you didn’t plan proactively for your 2015 tax year, then you might find yourself with quite a hole in your pocket…but here’s a question: how do you keep this monetary disaster from happening this year?
Luckily for you, it’s not that far into the year. You’ve missed a few months if you didn’t have an annual strategy already in place, but you still have time to do some planning to make your tax payout lessor than it was previously. See, when you plan for your taxes starting from January 1st of any given year, you ensure that you’re on track to pay a more minimal amount than you would otherwise.
Tax planning is all about efficiency and minimizing tax liability. When you plan your investments, expenditures and other financial plans, you set yourself up for tax success.
Of course, even with the best tax planning, you’re more than likely still going to be paying out some money to the government, so don’t confuse tax planning with a trick to completely eliminate taxes. Instead, use tax planning as a way to map out your fiscal year and plan out the best ways to invest and spend that mean less money you’re sending off come 2017.
Why it’s so important!
There are many methods you can use to start saving up for the 2016 year, like tax credits and savings plans, though they greatly depend on your specialized situation. For instance, if you want to participate in a retirement plan, qualified individual retirement arrangements can help you save for your current year. In general, retirement plans and non-taxable forms of investment can help immensely when it comes to saving cash when 2017 rolls around.
This is a great example of why tax planning is so useful – when you’re informed, you’re making better decisions about how to spend and save your money.
If you don’t plan, you are taking a high risk that you will pay more in taxes than you need to, and I don’t see the logic in that (And I doubt you do either!).
Tax planning is also something you can’t just do whenever you like – remember that it’s “planning,” which involves some forethought and strategy.? It also involves looking at multi-year expected tax bills, as the tax system is based on a calendar system with varying tax rates based on income levels.? This definitely allows for tax planning.?? You can still commit to a lot of tax planning this year and save quite a bit of money, but the best-case scenario is setting a plan in place that goes into effect ASAP – which means January 1st.? It is never too late to start planning, but the earlier the better (always).
When you plan your fiscal year, you make smarter decisions with your money. Think about it in terms of money you currently have – say $1,000. You can plan what you do with your money, like investing it or sorting out what you can buy with your cash, or you can blindly buy items as they come to you. Which seems like the wiser decision?
Using the same example, it is possible that you can a pay relatively low amount of taxes for the year without planning, just like you can blindly make some great purchases with your $1,000. Still, you also run the risk of making some bad decisions – or, at the very least, decisions that seem a little unproductive in hindsight.
That’s the whole point of tax planning. When you have a better idea of what to do with your money, investments and plans, you have a better chance at saving more.
Keep more of your hard earned money.? Don’t unnecessarily give it to someone else, especially in taxes!
If this makes sense to you, please don’t hesitate to shoot me a note at firstname.lastname@example.org.? We can talk about situation.? There is no charge for an initial meeting!
- Best Practices For Managing Your Business Cash Flow - March 18, 2020
- How to Choose Between Outsourcing and Hiring Financial Employees For Your Business - March 18, 2020
- Deferred Sales Trust Business Broker - May 21, 2018