Where did 2023 go?
Before we know it, we will all be preparing to file our taxes before the deadline (assuming no extension) of April 15th.
As we approach the end of year, what can you do to better prepare yourself?
Here are my top 3:
- Evaluate the taxes that you have paid so far this year compared to your income.
- If your income is primarily wages, grab a paystub: This is going to give you the most information. Take out all your contributions to 401k’s, Health Savings Accounts, FICA tax (Social security and Medicare), and any other pre-tax options (health insurance, etc.) from the “gross” amount. Then divide your federal tax into that number. That percentage will help you understand what percentage of your paycheck is going to federal taxes. Is it enough? Reach out to see if we can help you understand that.
- If you have significant non-W2 income, it is important to understand your total income and if you’re withholding and estimated taxes for the year have been sufficient. If you have questions, reach out and we are happy to coordinate directly with your accountant if it would be helpful.
- Charitable giving: Donating to charities before the year end can provide a dual benefit. You will both support a cause that you care most about and provide a tax deduction on those dollars. Keep in mind: Most of us immediately think about giving cash when we are going to donate, but donating investments that have been appreciated over time can be a great way to help a charity close to your heart strategically.
- Contribute to your retirement account: Paying yourself with pre-tax dollars is one of the best ways to prepare for retirement and reduce your tax bill today. If you don’t have a retirement plan available to you consider a Traditional individual retirement account (IRA)
There are many other ways to prepare for tax time but all of them require a proactive approach. If you are unsure where to start, please ask us.
This is how James reacts when he hears about tax preparation.