How to Start Preparing Now to File Your 2019 Tax Return
You only recently got done filing your 2018 tax return a month or two ago. Odds are, your 2019 tax return is far from your mind. But it shouldn’t be. In fact, proper planning and preparation can give you a better outcome on your 2019 tax return, potentially reducing your tax liability if handled properly. Here are a few things you can start doing right now to prepare for filing this year’s tax return.
Check Your Withholdings
First, take a look at your paychecks. Many taxpayers got an unexpected and unpleasant surprise when they filed their returns for the 2018 tax year, because the withholdings on their checks had been reduced with the implementation of the Tax Cuts and Jobs Act. This led to them owing much more in taxes, since less was being held back throughout the year.
Now is a good time to reexamine those withholdings and determine if you should have more or less withheld in 2019. If you’re not sure, the IRS offers a handy calculator to help you determine the proper amount to withhold. You can find that here. Use the calculator to determine the proper withholding amount, then complete a new Form W-4 with your employer to adjust your withholdings accordingly.
Plan for Monthly Retirement Contributions
Retirement contributions are an excellent way to reduce your taxable income, and therefore, reduce your tax liability for the year. And while many people wait until the last minute to make large contributions to their IRAs before filing, this can sometimes place a strain on your finances.
It is generally a better idea to simply plan for those retirement contributions, and make deposits into your IRA and/or 401k on a monthly basis instead. This allows you to make smaller deposits that don’t require you to scramble for usable funds just before you file. And, in the end, you get the same tax deductions for it; you may even get a larger deduction for it, as these regular contributions will make it more likely for you to be able to max out those annual contributions
Start Planning Your Charitable Contributions
The Tax Cuts and Jobs act nearly doubled the standard deduction amount for all taxpayers. And while this is excellent for those without many deductions to claim, for those who used to itemize large deductions, it makes it less likely that your deductions will exceed the standard amount. However, there is a way to work around this so that you can take advantage of the higher standard deduction, while getting the most from your itemized deductions too; it just takes a little advanced planning.
If you make regular charitable contributions each year (many people do this during the holiday season), you can simply delay those regular contributions until the very beginning of the next tax year. Delaying those contributions reduces the amount of your itemized deductions for this year, while increasing the amount for next year. How does this help?
If you have virtually zero deductions for 2019, you will still be able to claim the full standard deduction amount. Then, in 2020, you will essentially double your itemized deductions by making your regular annual contributions at the beginning of the year (delayed from the end of 2019), as well as at the end of the year (your regular annual contributions for 2020).
By bunching your contributions in this way, you effectively double your deductions, which can provide significant savings on your tax return.
Meet with a Tax Planner
One of the best things that you can do now to start preparing to file your 2019 tax return is to meet with a professional tax planner to discuss your unique financial and personal circumstances. One of our tax planning experts will be able to review all of your options, and help you make important decisions throughout the year that will provide you with benefits on your tax return when you file. This can even serve as a basis for important financial planning and investment decisions that you will make throughout the year.
Proper planning and preparation can go a long way when it comes to filing your taxes. It allows you to take control of your tax return, rather than simply accepting whatever outcome you get after entering the numbers. Don’t wait to start preparing for your 2019 tax return. Contact Demian and Company, CPA, today and make an appointment with one of our experienced and knowledgeable tax preparers.