Tax season is like that wet rag in your life that prevents you from getting too excited about a good thing. Just as spring is beginning to flourish, taxes arrive like a mean reminder that light always casts a shadow. It doesn’t have to be this way, though. A little bit of tax preparation eases the burden of tax season so that you can get out and enjoy the fresh flowers and warming temperatures without the weight of knowing the year’s least-pleasant task awaits.
5 Tax Preparation Strategies that Make Tax Season a Breeze
1. Reduce Income Tax
Prevention is the best medicine and this is as true of illness as it is of income tax. The best way to slash taxes is to reduce your taxable income. You can do this by contributing to qualified retirement accounts, health savings accounts, flexible spending accounts, and 529 plans.
2. Minimize Capital Gains Tax
If you hold an investment account (and you should, no matter your wealth), you are likely liable for capital gains tax. This tax kicks in when you sell something (like a stock or piece of real estate) for more than you initially paid. A tax professional is your best resource for learning how to minimize capital gains taxes; however, common strategies include:
- Spreading sales over multiple years.
- Transferring appreciated assets to a loved one or charity.
- Capitalizing on tax harvesting by declaring market losses.
3. Estimate Your Income Tax
A big part of what makes tax season so painful is the surprise hit to your wallet. This need not happen if you project the taxes you can expect to pay and plan accordingly. Here, too, you will want to consult a tax professional who can perform a tax projection and speak to you about options to reduce or manage the impact.
4. Consider an IRS Payment Plan
Sometimes even the best planning does not position you to be able to shoulder your tax burden. Life can have a way of knocking you down. When this happens, an IRS payment plan is a good option. While you will still face penalties for late payment, you avoid collection actions such as tax liens and levies; furthermore, an IRS payment plan is typically cheaper than paying your taxes with a credit card.
5. Seek Professional Guidance
You’re not alone if you never feel like you have time to do your taxes. Life is busy and despite the fact that we know it’s coming, tax season always seems to arrive at an inopportune moment. Planning ahead relieves the anxiety this brings and the best way to do so is to work with a professional. Their experience and insight will allow you to take maximum advantage of reduction, deduction, and investment strategies and will ensure no nasty surprises catch you off guard.
To learn more about tax preparation and how a little bit of planning can save you a lot of money, do not hesitate to reach out to the Deliberato Law Center either by calling us at (216) 341-3413 or using the contact form on our website.
Contact the Estate Planning Attorneys at Deliberato Law Center