End of the Year Tax Checklist
You have probably heard the saying, “No one cares more about your money than you do.” No matter how much your financial advisor says they care, you care more. No matter how much your tax advisor says that they care, you care more. That is why you should make sure that your tax documents are in order, before you bring them in to Practical Taxes. After all, we can’t get you the deductions if we don’t know about them!
With a couple of months left in 2015, you have some time to get everything in order. After the calendar flips to January 1st, it’s too late to make donations to lower your tax bill. So now is the time to get it in order.
We have put together a yearend tax checklist for you so that you can make sure your ducks are in order, or your receipts, unless you have a duck business that is.
Year End Tax Checklist
The process is simple. Just go down the list, and determine if you need to change anything in these last two months.
Calculate Your Estimated Income – If you are on salary, this isn’t hard to do. You just have to take a look at your paystubs and see where you will land at the end of the year. In all likeliness you already know what it will be.
Estimate Taxes Paid – At the end of the year you will probably have paid some taxes already. Determine how much you have paid.
Calculate Your Tax Bracket – This isn’t too hard to do, there are many online calculators that you can use to figure out how much you owe in taxes.
Determine your Refund Amount – Or if you haven’t paid enough, determine how much you will owe.
Increase Deductions – You have 2 months to get your income down enough so that you won’t owe any taxes. This can be done through charitable giving, increasing retirement account savings, or otherwise reducing your income for the rest of the year. Keep in mind that your standard deduction for 2015 will be $6,300 ($12,600 for married filing jointly).
That’s all there is to your tax checklist. But it is easier said than done.
How Much to Donate?
Let’s suppose that you and your spouse make $100,000 per year for your combined income. This puts you square in the 25% tax bracket. You like the fact that you get more in each paycheck by minimizing your withholdings, so over the course of the year you only had $4,000 (each) withheld. You have no itemized deductions.
Using the TaxAct calculator, at the end of the year you will end up owing $3,444. You would rather not pay that, so you need to give to some charities or contribute to your IRA (or other qualified retirement plan). But how much do you have to give?
Until you give over the standard deduction ($12,600) it is better not to itemize. So your starting point is giving $12,600. If you maximize your deductions to $13,000, your tax bill lowers by just $100. You still owe $3,344.
Let’s suppose you make some sacrifices and you are able to get your deductions up to $20,000. You still will owe $1,881. Not nearly as bad much as $3,444, but still a big chunk of money.
In order to get your tax bill to $0, you have to reduce your taxable income by $32,501! For most that won’t be feasible in just two months.
This is why tax planning all year long is necessary, but a year end tax checklist is a start.
Practical Taxes can Help with Your Taxes
Practical Taxes provides affordable tax preparation services in Billings, Montana. If you are looking for an accountant to do your taxes, we are your resource. If you are wondering, “how do I do my own taxes?” we can help you out by taking away that burden. If you want to reduce your tax liability next year, come to us this year and we can give you pointers.
Schedule your appointment with Practical Taxes in Billings, MT by calling 406-894-2050.