Well, communication and requests are now coming across my desk in a way that we haven’t seen for a few months, but I’ve come to expect it for this time of the year. We are in our intense “preparatory” stage for tax season AND so are our (smarter) clients.
I absolutely love what I get to do … but it does add some oomph to the “holiday rush”.
And one of the primary things we do right now is this rush of last-minute tax planning moves. Because as I’ve said before, preparing a tax return is a defensive, retrospective action … but making the right moves ahead of time is going on the offensive, and it affects the future.
Which means I’d like that far better for you.
One important note: Penalties for ACA NON-compliance (i.e., if you don’t have health insurance, and/or it isn’t reported correctly) are going up significantly this year. Open enrollment for the Marketplace plans ends on December 15th — so make sure you have that covered, at the very least.
But here are some other tax tips for you, which hopefully we can discuss in person or via phone ((337) 463-9263) before the end of the month/year.
Joshua Ortego’s End Of 2015 Tax Tips
“The art of life is a constant readjustment to our surroundings.” – Kakuzo Okakaura
When we make informed tax decisions, it is always best, of course, to start with real data. That’s why a good first step in any tax planning environment is preparing a draft tax return, to see where things stand before you make any hasty moves. Obviously, this is something we would be doing on your behalf, unless you want to navigate the software for a few hours. That is up to you.
(And no — you don’t have to fill in every line of your 2015 Form 1040. But a down-and-dirty analysis of what your upcoming tax return might look like could reveal some tax areas that you need to take care of by Dec. 31.)
But knowing what your income will look like, and particularly having in mind what you project that it might be for 2016 will help make these decisions easier.
Next, it’s always a good idea to harvest tax losses if you have investments: Did you sell some assets earlier for a nice gain? Or are you expecting your mutual funds to provide you with a nice payout of dividends and/or capital gains distributions? Look for some losers in your portfolio to offset that added income.
Take a quick look at your withholding — and you can make some last-minute shifts to ensure that you aren’t overpaying, or to prevent yourself from being slapped with an underpayment penalty (yes, those do exist).
And then, of course, we move to the meat of your possible moves. Before December 31, we can help you look into…
• Winterizing your home with upgrades that qualify for the energy efficiency tax credit of up to $500 (which can get a little complicated, so make sure you have some guidance on that).
• Spending down your medical flexible saving account (FSA) balance.
• Bunching deductible expenses, both miscellaneous and medical.
• Maximizing the sales tax deduction with a tax-qualifying major purchase.
• Giving to your favorite nonprofit.
• Paying next semester’s college costs early and counting the costs toward the American Opportunity tax credit (some income limits apply).
• Considering ways to defer income if it will push you into a higher tax bracket.
Also, you could …
… Make the Switch to a Roth IRA. Roth conversions are taxed in the year the conversion happens. However taxpayers have the option to undo part or all of that conversion by their filing deadline. But in order to retroactively undo part of their conversion next year, they first have to convert this year. So if you are on the fence about converting, consider taking the plunge before the end of the year knowing that you (and/or WE) can re-characterize some or all of the amounts early next year.
All of these tax tips are good options to make a dent in your 2015 tax bill. Help us help you make the right decisions and call: (337) 463-9263 to set up a year-end tax planning appointment (or click the button at the top of this page to email me).
To your family’s well-planned saving over the holidays…
Joshua L Ortego, CPA