Posted by Tim Thompson CPA PLLC

Projected To Pay Taxes Next Year: What Are You Expected To Now?

Projected To Pay Taxes Next Year: What Are You Expected To Now?

With the next tax season around the corner, you might be wondering if you've paid enough tax this year. Don't worry, we have put together a list of cash flows you can achieve before December 31st to improve your tax outlook. together

Contribute More To Retirement

If you add to your company's 401 (k) and traditional IRA, you reduce your taxable income and build your retirement reserve. The limit for a 401 (k) is currently at $ 6,000 ($ 7,000 for 50 or older) for IRA and $ 19,000 ($ 25,000 for 50 or older).

You may also be eligible for a savings loan of up to $ 1,000 ($ 2,000 married filed jointly). The savings loan is a little-known tax credit that low and middle-income taxpayers can only get by contributing to retirement. Since this is a loan, this will reduce the taxes owed by dollar for dollar. 

Donate to Charity

The holiday season is usually a great time to clean closets and household items to provide for those who need these items. You can help someone in need and get a tax deduction for monetary and non-monetary donations made to a qualified charity organization if you itemize the tax deductions.

If you volunteer with a qualified charity, remember that you can deduct your mileage (14 cents per mile) for a charity. Ensure to keep proper records so that your tax preparer can accurately assess and track the resources donated each year and the mileage for volunteering.

Make these donations count for your taxes by donating by December 31st. Even if you donate by credit card, you do not have to pay it off in 2020 to benefit from the tax deduction. 

Remember The Things You Do All Year Round.

Remember that what you do in your daily life can be a tax deduction or a loan that can improve your tax image! Make sure you collect and keep track of all tax-deductible expenses, such as childcare, college education, and health care, to include them in your taxes.

Know Where You Stand

As the end of the year approaches and another tax season approaches, it will be helpful to know where you stand on taxes and finances to make smart money movements. If you haven't already, go ahead and check your numbers.

You can use free tools online to help you determine where you stand and take action to save taxes. Some free tools give you an estimate of your tax refund or let you know if you need it and give a side-by-side comparison of how tax reform affects your taxes.

On the other hand, some give you an idea of where you are to avoid any tax surprises. While it may seem too late to change your withholding tax for the year, you can use your W-4 to see how much you should have taken out of your tax and ask your payroll provider or employer to take more out of the last payment or you can estimate your quarterly tax payment on the date of the last tax due to date for the fiscal year 2020.

Save Now

If you find out that you owe now, you can take these smart steps to lower the taxes you owe, and you can even start planning how to pay up by saving now. You can also start automating transfers by turning them into savings, and if this does not seem feasible with your current budget, you can try doing a money challenge. This can be an effective way to save more if you turn it into a challenge.

You can also learn new ways to optimize your budget in the future, and if you end up finding that your tax bill is still too high to pay at the same time, contact a tax preparer and set up an IRS payment plan.

Thoughts On Tax Management

As you can see, you can make huge profits from your taxes if you make sure to claim all applicable deductions and tax credits for which you are eligible. From now on, you will have more time to get things squared away, so you're ready for tax time.

Tim Thompson CPA PLLC
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