Goal: Monitor your tax strategy
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” ~ Judge Learned Hand (1872-1961), Judge, U. S. Court of Appeals in the case of Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935)
How can I lower my taxes?
Tax planning is for everyone, not just the wealthy. By reviewing and planning your tax strategy, you can minimize your taxes. Here are some steps that you should take every year to help you make sure that you are minimizing your taxable outlay.
- File your taxes on time. Tax returns are due on April 15 (if April 15 is on a weekend, the IRS and individual states usually extend the due date to the following Monday but check the IRS and your state’s tax websites to confirm). Request extension(s) if necessary. If you do apply for an extension, be sure to review the IRS guidelines (here). States have different rules, so check with your state tax authority. Fines and penalties can be assessed for missing deadlines.
- Maximize your deductions. Be sure to review your tax return carefully to ensure you are maximizing all of your deductions. This includes using tax-advantaged retirement accounts and college savings accounts.
- Do a paycheck checkup. Use the IRS Withholding Calculator to perform a quick “paycheck checkup.” Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks. The IRS Withholding Calculator is (here).
- Review your Property Tax assessment. If your property value decreases, you can usually request that your property be reassessed to determine if your property tax can be reduced. You can use an online service like Zillow to see comparable home-price values and an estimate on your own home.
Pick up a copy of Get Ready: A Step-By-Step Planner for Maintaining Your Financial First Aid kit to guide you through organizing your financial documents, including all of your tax-related documents. Pick up a copy on Amazon (here), purchase a digital copy (here) or learn more (here).
Access the Get Ready Toolkit and download the tax documents and property taxes worksheets (here).
The Get Ready Toolkit also includes a subscription to the Get Ready Newsletter which follows the Get Ready Financial Calendar to help you stay financially prepared.
NOTE: Please note that I am not a tax advisor and this is for informational purposes only. For tax advice, please consult a qualified tax advisor.