By Justin Smith
For the Opelika
As this year’s regular tax filing season wraps up (don’t worry late filers – Lee County residents still have until July 31, and you have until September 15/October 15 for business/personal returns), there are several key items to think about to get ready for next year.
First, as I wrote last week, make the best use of your options if you owe money to the government.
Don’t put those taxes on a credit card – the interest rate from the government is much lower, and they will accept payment plans. A guaranteed low rate loan from the government beats credit card interest anytime.
Second, it may be time to consider updating your withholding allowances. If you received a substantial refund this year, it means you overpaid the government and did not have the use of your money throughout the year. While over withholding can provide a forced savings plan, you can only withdraw once a year and the government is not going to pay interest to you. Why not follow up that hefty refund with a nice increase in your take-home pay? Consider filing an updated W4 with your employer/payroll department to reduce your withholdings and put additional money in your pocket each paycheck throughout the year. The only thing better than a raise and bonus is another raise and bonus at tax time!
Next, if you are self-employed and faced a large tax bill, consider making quarterly estimated tax payments to avoid sticker shock next spring. Employee payroll withholdings are nothing more than frequent estimated payments.
If employees pay estimated taxes, you should too. A quick and easy way to project your 2019 estimated taxes is to divide up your 2018 liability over 4 quarterly payments, and send those in regularly using Form 1040ES.
Don’t forget your state tax – just because it’s smaller doesn’t mean you should ignore it. Paying smaller amounts can help you avoid a major bill at the end of the year. Taxes should not be considered an emergency – you know they are coming, so it’s best to be prepared for them.
Don’t forget to keep good records to document your financial activity throughout the year. While your
likelihood of being audited may be low, your accountant cannot claim the deductions he or she doesn’t know about. Do your CPA a favor – give him a complete record of your taxable activity throughout the year so they can provide you with the very best tax return possible.
Most importantly, it’s time to set your budget and financial objectives for the year if you have not already done so. Do you want to get out of debt? Save for a home? Invest for the future? Whatever your goals and objectives are – seek out and engage professional guidance from a CPA, investment advisor or other wise counsel and get started on your road to success.
Justin Smith is a licensed certified public accountant in Opelika, specializing in individual and small business tax and accounting. He can be contacted at 251-209-2579 or Justin@JSmithCPA.net. His website is www.jsmithcpa.net.