Most people think of taxes in April, or maybe start strategizing as early as January. The truth is, the best time to take a high-level view of your tax strategy is in the fourth quarter of the year. Making minor adjustments now can show major benefits when it comes time to pay the tax man in April. Here are some helpful fourth quarter tax strategies for everyone.
Maximize Tax-Advantaged Accounts
If at all possible, pay the yearly maximum into your retirement accounts. Contributing the highest amount allowed reduces your taxable income. The maximum you can contribute, as of 2018, is:
- $18,500 to your 401(k) if you’re under 50 years old
- $24,500 to your 401 (k) if you’re 50 or older
- $5,500 to your IRA if you’re under 50 years old
- $6,500 to your IRA if you’re 50 or older
Other accounts that are tax-advantaged should be reviewed as well. If you’re saving for education through a 529s account or you have an HSA (healthcare spending account) account, bring that information to us, so that we can maximize your tax position.
Delay December Invoices Until the End of the Month/Year
Depending on the nature of your work, it may make sense to delay sending December invoices out until the end of the month. You should use this strategy if it looks like you will be in the same tax bracket or a lower tax bracket. Delaying billing can help by pushing that income into the next year. You incur and pay taxes in the year that you receive the income, not the year it was billed to the client.
Review Withholding Rates
Take a look at your withholding rates. Sometimes changes during the year affect your need for additional or less withholding. We can help you evaluate your withholding to avoid penalties for underpayment.
Be Proactive with Tax Planning
Be proactive! See us now for the end of year tax planning, so that we can help you put some measures into place that will help your year-end position, and give some advice for your business and personal tax going forward.
There are new tax laws that are adopted all the time, and you can trust us to stay up to date and to keep you informed. Understanding how new laws impact your business is critical. Let us help you to minimize your taxes due, or to maximize your refund.
Even though it’s not “tax season,” now’s the time for planning. We can help you walk through these fourth quarter tax strategies and show you how to best apply them. Contact us today to set up your Q4 tax planning appointment!