Your Summer Tax To-Do List

How can you improve next year’s tax situation? By taking steps this summer! Whether you received a big refund or paid your taxes on tax day, taking action now can ensure next year’s tax bill is optimized by not paying a dollar more than necessary.

As always, discuss your financial ins -and-outs with your CPA so you can have a plan in place, which helps minimize unwanted tax surprises.

Update paycheck withholdings and forecast estimated tax payments.

Reviewing and updating withholdings now gives you several months to spread out the tax impact on your daily finances. Adjust your paycheck withholdings using Form W-4 with your employer to either increase or decrease your anticipated refund. If you are self-employed, you can instead adjust your quarterly estimated payments. Other factors will change your 2023 tax liability, but using your 2022 refund or tax bill as a baseline to update withholdings is a good first step. Just make sure your withholdings will cover 90 percent of this year’s tax bill or you may be subject to an underpayment penalty.

Organize last year’s tax records.

Create a file to hold your completed tax return, supporting schedules and documentation. Organize the file so it matches the flow of Form 1040 — put income documents first, followed by deductions, credits and estimated payments. Doing it this way allows for easy access to your records in the event of an audit. Once you finish with last year’s file, create a checklist of expected documents and a new file for 2023. This will help you keep track of your tax paperwork during the year and speed up the tax filing process in 2023.

Review your budget, subscriptions, and policies.

Now that we are half way through the year, are you where you want to be financially? Inflation is hitting some families’ budgets hard. Take a look at your spending and saving habits to see if you need to adjust accordingly. Rising interest rates may be good for growing savings accounts, but a challenge for those carrying credit card balances. Another area to look at in your spending is subscription renewals. Today’s digital world comes with many different recurring subscriptions. See if you can trim costs by evaluating which one’s you are and are not using. In addition, take the time to review your insurance policies (home, auto, life, etc.) and get quotes from new providers to see if a lower rate can also help you out financially.

Schedule a tax planning appointment.

Midyear tax planning is essential to ensure the proper roadmap is in place to realize your tax goals. Using your 2022 tax return is a good starting point for your plan, but it’s not enough. Getting married or divorced, planning for retirement, having or adopting a child, buying a house, paying for college, starting a new job, or getting a raise are just some of the life changes that can dramatically change your tax situation.

Most of us want to forget the hassle of tax season as soon as the form is filed, but the savvy taxpayer uses this time to prepare and plan for a better tax result next year. Please call if you’d like assistance.