It’s the middle of summer and the last thing most people are thinking about is taxes. But, now is a great time to make some tax adjustments that can save you money come tax season. Waiting until the end of the year means that you’ll be right in the middle of holiday season. For most of us that means holidays make our budgets even tighter than other times of the year. So summer is a great time to do a mid-year check-up on your tax status.
4 Simple Mid-Year Tax Adjustments
1. Adjust your Payroll Withholding
If you received a refund in the 2016 tax return season, then it most likely means you can adjust your payroll withholding. Why do this? You ask. Because you could have more funds to utilize in your monthly budget.
For most living paycheck to paycheck is very difficult. Having even a couple of hundred extra per month might be the difference you need to make life a little easier. Essentially, when you pay per paycheck you are granting the government the right to utilize your money, interest free.
The average annual refund is over $2700. If you divide that refund by 12 months, you could keep $230 in your family budget each month. So adjusting your payroll withholding is worth it.
2. Use your Flexible Spending Dollars
If you opened a Flexible Spending Account (FSA) remember that your funds must be used by the last day of the year in order avoid losing any remaining balance. While a FSA is a great way to utilize income pre-tax for medical expenses, it is a use it or lose it type of account. That means that if you contribute $1200 to your FSA and only utilize $1000 of those funds by December 31, you forfeit the $200 remaining balance.
So now is the perfect time to schedule your vision, dental and annual exam appointments before the rush of the end of the year appointments make it difficult to get in to see the doctor.
3. Contribute to Retirement Accounts
If you have a 401K or IRA you can contribute funds to those accounts and also take a deduction for those contributions on your tax return. For a 401K those deductions are made pre-tax from your paycheck.
You can contribute up to $5500 per year to an IRA and $18,000 annually to a 401K if you are under the age of 50. Over 50 years, those limits increase to $6500 and $24000 annually.
4. Make your Estimated Tax Payments
If you have owed taxes in the last few years, it’s a good idea to anticipate owing in the coming year. This is especially true for individuals who own their own businesses or work as independent contractors. But you can get ahead of owing a large amount by estimating what you will owe, and making smaller payments throughout the year leading up to tax return season. This way, you won’t incur a large tax amount all at once.
Not sure where to begin? Give us a call. We’re happy to help you assess your situation to help ensure you are positioned well for tax season.