Year-round tax planning pointers for taxpayers

Tax planning is a vital part of our financial responsibilities as taxpayers. Proper planning can help us maximize our savings and minimize our tax liabilities. Below are some key tips for effective and less stressful tax planning throughout the year.

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·???????? Organize tax records: Create a system that keeps all important information together. Taxpayers can use a software program for electronic recordkeeping or store paper documents in clearly labeled folders. They should add tax records to their files as they receive them. Organized records will make tax return preparation easier and may help taxpayers discover overlooked deductions or credits.

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·???????? Identify filing status: A taxpayer's filing status determines their filing requirements, standard deduction, eligibility for certain credits and the correct amount of tax they should pay. If more than one filing status applies to a taxpayer, they can get help choosing the best one for their tax situation with the IRS’s?Interactive Tax Assistant, What Is My Filing Status. Changes in family life — marriage, divorce, birth and death — may affect a person's tax situation, including their filing status and eligibility for certain tax credits and deductions.

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·???????? Understand adjusted gross income (AGI): AGI and tax rate are important factors in figuring taxes. AGI is the taxpayer's income from all sources minus any adjustments. Generally, the higher a taxpayer's AGI, the higher their tax rate and the more tax they pay. Tax planning can include making changes during the year that lower a taxpayer's AGI.

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·???????? Check withholding: Since federal taxes operate on a pay-as-you-go basis, taxpayers need to pay most of their tax as they earn income. Taxpayers should check that they're withholding enough from their pay to cover their taxes owed, especially if their personal or financial situations change during the year. To check withholding, taxpayers can use the?IRS Withholding Estimator. If they want to change their tax withholding, taxpayers should provide their employer with an updated Form W-4.

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·???????? Make address and name changes: Taxpayers should notify the United States Postal Service, employers and the IRS of any address change. To officially change a mailing address with the IRS, taxpayers must compete?Form 8822, Change of Address, and mail it to the correct address for their area. For detailed instructions, see page 2 of the form. Report any name change to the Social Security Administration. Making these changes as soon as possible will help make filing their tax return easier.

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·???????? Save for retirement: Saving for retirement can also lower a taxpayer's AGI. Certain contributions to a retirement plan at work and to a traditional IRA may also reduce taxable income.

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By following these tips, we can ensure greater control over our finances and ensure a more solid financial future. If you need help with your tax return, at My Accounting Now we have a team of accounting specialists, call us at 786-228-8689 or send us an email to [email protected]