When most people think about taxes, their minds jump straight to January through April. But the truth is, effective tax planning doesn’t start when it’s time to file your return, it starts months before. Being proactive throughout the year can help you avoid surprises, reduce your tax bill, and put you in control of your financial picture. Here are three key reasons why you should start planning now:
Tax planning is most effective when done before the year is over. Once December 31 passes, many opportunities to save on your tax bill are gone. By starting now, you’ll have time to identify deductions, credits, and strategies that fit your situation. Plus, spreading out tax planning tasks makes the process less overwhelming when filing season rolls around.
One of the easiest ways to avoid a tax surprise is to review your paycheck withholdings and estimated tax payments. If too little is being withheld, you could face a large balance due (and potential penalties). If too much is being withheld, you’re giving the IRS an interest-free loan. By reviewing your current standing mid-year or in the fall, you can make adjustments to ensure you’re on track and avoid unwanted surprises.
From maximizing retirement account contributions to considering charitable donations, there are a variety of tax-saving opportunities available before year-end. Business owners may also be able to accelerate expenses or defer income to reduce taxable income. Identifying these moves early gives you more flexibility and ensures you won’t miss out on valuable savings.
The bottom line: Proactive tax planning can help you minimize your tax bill, avoid surprises, and feel confident heading into filing season. Don’t wait until January. Start today by checking your withholdings and exploring tax strategies that can make a real difference.
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