Advantages of Tax Planning

Almost everyone thinks there is tax season, that's the only time to plan and work on your taxes. The sheer anxiety that it brings people during tax season is exhausting.

Taxes ideally should not be feared but planned well in advance, working with your current and future cash flows.

Here are some pointers to understand your situation better

Check your income on

1. W2 - Understand your withholding on W4.

2. For employees working with companies that have stock as huge part of compensation, employees should be aware of RSU/ESPP/ISO grant, vesting, exercise dates. Check with your trusted tax advisor on tax liability based on exercise date & subsequent sale of stock.

3. Long/short term sale of stock/assets are treated differently for tax purposes and have a substantial change in your tax lability, make during the year you take account of the huge gains and losses.

4. Each year the itemization and standard deduction thresholds change. Make sure use it to your advantage.

5. The pre- tax retirement is always helpful to save your current year tax, but also forced savings for future. In most cases it is best to max out retirement saving accounts for each year.

6. Simple IRA/ SEP IRA/Roth IRA/ Roth 401K, some products that are available for long term tax planning. Please talk to your trusted advisor on your options.

7. There are multiple credits like child/dependent/education/ energy available for your taxes based on income and filing status, working with these helps with understanding your savings in advance. For example: buying an electric vehicle or energy efficient home improvement credit.

8. If you have a side hustle, that generates uneven income each month, working the math to anticipate the tax liability is always a wise thing to do.

9. Small deductions during the year for your business, are useful tools, like managing a home office expense, depreciation on small assets, or business vehicle.

10. As a part of planning creation of LLC, S. Corporations & trusts. Please talk to your tax advisor on this. Net operating losses, business losses,

11. Additional income sources through rental, partnerships through K1's, pensions, social security benefits, or farm income all lead to changes in your tax liability.