Many people are getting ready to walk into 2018 thinking that they will receive a huge tax refund. Unfortunately, many of those people may be surprised. I would like you to do three things before the end of this month to help with your tax situation:
Increase Tax Withheld From Your Pay
If you owed money to either the IRS or the State government on your 2016 tax return, it may be time for you to have more taxes taken from you. I know, that means less money, but it also means less of a payment to the taxing authorities in the new year. Speak with the payroll or HR personnel at work immediately to make the change.
Increase Your 401K Contributions
If you are under 50 years of age, you can contribute up to $18,000.00 annually to your 401k and $24,000.00 if you over age 50. By increasing your 401k contributions you can save tax dollars in 2017. Because these contributions are pre-taxed, less of your salary will be subjected to Federal taxes and this could save you some tax dollars on the 2017 tax return. Make this change ASAP!
Consider donating some more money to your favorite nonprofit organization or cause. Make sure you obtain a tax receipt for the donation. Yes we love to help, but if our help can help us, that would be great also! If you have some things around the house that you may be able to donate, do it! Take a weekend or a day off and gather all the items around your home that you can donate. Charitable donations—cash or non-cash items—can help lower your tax liability on your tax return.
If you are a business owner and your business is profitable in 2017, you may want to consider paying some of your anticipated expenses for 2018 now. Prepayments are a great way to invest in your business while saving on taxes.
Speaking Of Business
If you are a business owner you may want to consider starting and funding a SEP IRA if you don’t currently have one. Speak with your tax professional if you don’t, then get in contact with me (smile), but your SEP IRA contribution cannot exceed the lesser of: 25% of the employee’s compensation or $54,000 annually. Another great way to save on taxes and invest in yourself if the situation is right!
Remember, take action immediately! Don’t wait to make the moves that are applicable to you, your bank account will thank you!