tax withholdings form with coffee and calculator

4 Things Your 2018 Tax Return Taught You

Filing Your Taxes

The deadline for filing taxes was April 15th, 2019 and most individuals have already filed their fees. The tax period is over and you can go back to handling your finances properly in preparation for the next tax season in 2020. Unfortunately, putting taxes at the back of your mind this year will only make it harder for you next year. Taxes are filed once a year but there’s plenty that can be done year round to help make that window of time a lot less stressful. If you want to make your 2020 tax period smoother, it is prudent to begin now. Starting late only puts pressure on you and your finances.

Preparing for 2020

If you want to save money on the 2019 tax return (due next year in 2020), you should start your preparations now. The following are some of the ways you can save money.

1. Adjust your tax withholding

Your tax withholding is the amount of money that the IRS takes from your paycheck each month for taxes. This amount usually depends on your salary and your allowances. If you have more allowances, less money is taken by the IRS which leaves you with a bigger paycheck. On the other hand, if you have few allowances, more money is withheld for tax leaving you with a small check. This means your refund from the IRS will be bigger next year. If you want a bigger refund, you need to update your W9 form so that IRS can withhold more tax from your paycheck.

2. Begin tax planning now

You may have heard of tax planning but have never tried it before. The first step to planning is having a ballpark estimate of what you’re going to make in the upcoming year as well as potential income, such as inheritance, stocks, home equity, etc. If you have significant purchases such as buying a house or are getting a new job, you’ll want to factor these into your annual taxes.

3. Tax preparer

Of course, planning is only one part of the equation. The next step typically involves hiring someone to prepare your taxes. A qualified CPA can help ensure you have all the forms you need and can help you with the planning and accuracy of your taxes. Plus, it’s not a bad idea to have someone to tell you what you can expect, based on their experience. Rather than wait until the month taxes are due, if you find out you’re changing jobs or getting an inheritance, notify your CPA immediately to know what you need to do (or know) for taxes.

4. Always consult

Throughout the year, you are bound to make large transactions that not only have a massive impact on your life but taxes as well. Some significant purchases may have a huge impact on your taxes and increase the overall amount in the long run. While it may be essential for you to to make these transactions, it is crucial that you do it the right way. This means you need to consult a tax pro or preparer before making huge deals.

This is true in many fields but especially if you own income properties or real estate. Repairs and improvements have remarkably different tax implications and need to be considered if you’re budgeting for your annual taxes.B

Filing taxes is rarely a stress-free affair, but with appropriate planning, you can mitigate much of that stress so April 15, 2020 isn’t an ominous cloud overhead.

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.