Keeping a shoebox full of wadded-up receipts and tax documents and then rushing to your tax preparer at the last moment isn’t going to give you the tax results that you want. No matter how much you dread them, taxes aren’t something you can think about just once a year. Failure to plan is planning to fail. That phrase applies to many aspects of your life, including your taxes. Instead of crossing your fingers and hoping for the best, you can avoid tax-time failure with the right planning. Decide now what you want and how to plan for 2018 taxes.
Make a Plan for 2018 Taxes
Chief Justice William H. Rehnquist once said that “there is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.”
Which then begs the question, when it’s tax time, do you want your preparer to simply tell you how much money you’ll owe to the IRS, or would you rather know now how you can pay less? For most people, the answer is most likely that you want to know how you can pay less taxes.
The key to paying less taxes is planning. When tax deadlines arrive, it’s too late to structure your salary or create medical expense reimbursement plans. You have to know those options exist ahead of time, and that requires planning.
It’s important that you understand the necessary tax forms. You need to know if you’ll be receiving W-2s, 1099 forms, or both. You need to know what a 1095 form is. You won’t realize that you’re missing a particular tax document if you didn’t know that it was coming. Take your own time to review the Form 1040 instructions as well as any other IRS instructions that apply to your individual situation.
Life changes can affect your tax planning. If there are significant changes that have happened, or you are planning for, you need to let your tax preparer know. While some life changes that result in a name change could be obvious, others might not be. Are you expecting to make more money, buy a house, or have a baby? Your tax preparer can’t make the right plan for you if they don’t have all the details.
Strategic Tax Planning
Minimizing your taxes requires strategic tax planning. You need to know what you should do, when you should do it, and how you should do it. New changes to the tax code mean now is the time to plan for your 2018 tax return if you want to see the biggest difference. From reviewing your withholdings to qualifying your business for a tax break, there are several ways to be strategic with your tax planning.
Most adults realize there are two ways to have more cash in the bank. You can either spend less or you can make more. Making more money is equivalent to financial offense. Spending less money is good financial defense. For many people, taxes are our biggest expense. It makes good financial sense to focus our financial defense where it can make the most impact.
Strategic tax planning guarantees that you will see results. So why wouldn’t you do it? Don’t waste your time and energy on efforts that can’t guarantee you will see any change in your circumstances. Instead, focus on working with a tax-efficient tax professional for the best results.
Keep More of What You Make
Individuals who make a significant income from their pass-through business need to pay particular attention to their 2018 tax plan. Owners of these businesses, which are claimed as income on individual income tax forms, may now be able to exempt 20 percent of that income from federal taxes.
Of course, there is a flip side to cutting taxes, as the federal budget does still require income. Congress tightened or eliminated many of the deductions that individuals are accustomed to, from mortgage interest to state taxes. So while standard deductions went up, personal exemptions were cut. Congress also scheduled most of the new rules for individuals to expire at the end of 2025.
All of this together creates a tangled web of changes. There are phase-in dates to remember and phase-out dates to note, with phase-in and phase-outs crisscrossing each other over the next several years. That makes it all the more important to start planning now. Pull out your 2017 tax return and start making a plan for your 2018 taxes. Financial Gravity understands that it’s not what you make, it’s what you keep. That’s why we recommend strategic tax planning to help you keep more of what you make. Find out how to make the New Tax Law work for you with our new book. You can get your free copy today!