April 15 has come and gone and perhaps you filed your tax return and perhaps you instead filed for an extension. If you filed for an extension, remember that’s only an extension of time to file, not an extension of time to pay. If you think you will owe, you should send the IRS a payment, making sure you write: “2014 Form 1040” and your Social Security number on the check.
If you have filed, you likely have exhaled, happy to have the chore accomplished.
But guess what? Tax season is never really over. And I’m not saying that purely from a tax professional’s point of view. Keeping as much of your own money in your pocket and out of the hands of the IRS is the goal of pretty much everyone in this country. And in this day and age with loopholes closing and tax laws changing seemingly every twenty minutes, it pays to take steps to ensure that next year you will legally pay the minimum necessary.
Below are some tips to help you on the journey:
1. Review your 2014 income tax return. If you are number savvy, you might be able to do this on your own. If not, make an appointment with your tax professional for later next month (he or she is likely off to Barbados right now!) to look over your taxes and determine if there are any cost saving measures that you can employ to reduce your liability this coming year.
2. If you will experience any major life-changing events this year – marriage, divorce, birth of child, move to another state, changing jobs, losing a job, becoming self-employed, getting rich or poor from the stock market, whatever it may be - get with your tax pro for a planning session. It’s important to crunch the numbers to not only predict next year’s tax liability, but to find ways to minimize it and to prevent any big surprises next April 15. A client came to me a year ago who had gone through a divorce, turned his personal residence into a rental property, and changed jobs. He was shocked at what he owed. If he had sat down with a tax professional during the course of the year, there may have been steps he could have taken to reduce his liability. But by the April 15th due date it was too late. Most transactions must occur during the tax year.
3. Start a tax file for 2015. Throughout the year put in the receipts and data and charitable organization acknowledgement letters and any other information that will be necessary for preparing your 2015 income tax return. Getting organized as you go is so easy and rewarding. Then come next January, slide in those important tax documents that arrive in the mail – W2s, 1099s, K-1s etc. You will magically be prepared to file your taxes by the beginning of February.
4. File early. Your tax pro is considerably more clear-headed and relaxed in February than on April 14th. Some preparers offer a discount for bringing in data before February 10th for example. Preparing your return far in advance of the due date may provide you with a window of opportunity to stockpile your retirement plan before the April 15th due date thus saving you money. It may also give you time to review your finances and determine if you had missed any deductions.