With another year almost behind us, the new decade is fast approaching. While it is anyone’s guess what the future will bring, one thing is certain: tax season will roll around soon enough. However, tax season does not need to be too stressful, especially if you prepare before the year ends. Efficient year-end tax planning for 2019 can help you minimize what you owe, maximize your refund, and avoid any unwanted penalties. The following 9 tips will help you get ready to file in 2020:
- Contribute the maximum tax-deductible amounts to your 401(k) and health savings accounts.
Establish and contribute to an Individual Retirement Account. Contributions made to retirement plans, such as 401(k)s and HSAs, are tax-deductible. They also reduce the amount of taxable income you accrue for the year. Contributing the maximum tax-deductible amounts to these accounts will help you save money on your taxes. However, the deadline for doing so is December 31, so act fast in order to capitalize on this tip.
- Make a tax-deductible charitable donation.
The Tax Cuts and Jobs Act of 2017 has recently affected tax-deductible charitable donations. Essentially, it is now more difficult to claim itemized deductions but worth it if they exceed the standard deduction option. If you are close to this threshold, you should make a donation before the year ends.
- Consider transferring money from a traditional IRA to a Roth IRA.
This conversion may help you avoid adverse effects of the Tax Cuts and Jobs Act of 2017. Money in a Roth IRA is not subject to taxes upon withdrawal.
- Defer end of the year income until 2020.
If you are expecting a year-end bonus, or are billing a client for work done in December, consider deferring. Receiving that bonus, or payment for your services, before the year ends will make them subject to income tax for the 2019 fiscal year. You can avoid this, in the short term, by receiving them in 2020 instead.
- Keep an eye on your flex plan.
Flexible spending accounts offered by employers allow employees to set aside money that is not subject to income or Social Security taxes. However, many flex plans do not allow for rollover from one year to the next. You should double-check with your employer to see how long you will have access to the contents of your flex account. Most likely, you will need to spend this money before December 31!
- Make sure you are paying enough in taxes throughout the year.
Paying enough throughout the year will ensure that you cover most, if not all, of your tax bill by tax season. However, if you suspect you have not been paying enough you can remedy this by increasing the amount withheld through your employer.
- Make sure your information is up to date.
Double-check with your employers that your contact information on file is accurate. This will ensure that your tax forms get to you on time!
- Opt for automated services.
A lot of companies and organizations offer electronic deliveries of tax forms. Opting-in to these services can keep you organized and, since they’re digital, you’ll never misplace your tax forms!
- Meet with an advisor.
Year-end tax planning for 2019 is best done with a tax advisor. An experienced advisor will know how best to help you plan for tax season given your individual circumstances.
Have a Question? Contact King of Prussia Tax Law Firm Today
Troncelliti Law Associates can help you understand strategies for minimizing your tax obligations. We help both individuals and businesses successfully plan their taxes. You can contact us at (610) 365-4240 or through our online form here.
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