While many tax preparation firms go on vacation after tax season ends, my firm stays busy year round helping clients plan their taxes, budgets, and overall financial lives. There are often many things one can do to pay less taxes for 2019 and we can implement such a plan now. This kind of planning may be the springboard to financial success.
Most important is to conduct a pay stub review which we do with clients who are so inclined. When we receive current pay stub(s) from our clients, we will be able to project a 2019 tax return now. This will give us a great idea about where things will stand for the 2019 tax return. Most of us would not want to owe $20,000 in taxes, but if upon further review we DID owe, it is certainly best to know ahead of time and not until the following March. The majority of the big picture, long term planning we do with our clients revolves around us being proactive and not simply reacting to a particular situation.
While reviewing your pay stub, we can see if you are maximizing your savings potential through your company’s retirement plan. If you are under age 50 you can contribute up to $19,000 into a qualified retirement plan and if you are turning 50 this year you can max out at $25,000. If you are not covered by a plan and are age 50 or over you can contribute $7,000 to an IRA. Are you contributing enough? There are tax benefits to contributing. Many other tax breaks have been limited or eliminated completely – it is great when we can take advantage of legal IRS deductions and save for retirement at the same time.
When it comes to your investments, it is always good to analyze your winners and losers and perhaps sell the winners or losers to harvest tax losses or tax gains. A good overall strategy is to sell the stocks or funds that are losers in order to harvest the losses on the tax return. But taxpayers can also harvest investment gains to take advantage of the 0% long term gains rate which maxes out at $39,375 for single filers and $78,750 for married filers. Be sure to consult your tax advisor for the best way to handle the sale of the investments as well as the taxation and reporting rules for the gains and losses.
Tax reform is in full swing now and there are new rules for taxpayers and corporations. Self employed folks should review their business entity to see what works best with the new tax rules. Individuals should consider bunching their charity or medical deductions by determining which tax return year will benefit the most from the write-offs. You may shift deductions to next year or this year depending on when they will work best. Consult your advisor regarding this option as well!
Consider “coming clean’ with your financial life by working with a trusted advisor to help you plan your overall money program. Let’s look at your budget, your cash flow, your business ideas, as well as your goals, expectations, and thoughts about your future.
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About Stu: With more than 29 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.