Tax season can feel like a marathon, and now that it is over, you might be wondering what your next steps should be. Whether you are looking to stay organized for next year or simply want to ensure your financial health, the post season is a crucial time. At Scout Tax, we are here to help you navigate these waters with ease. Let us explore some essential steps to take now that tax season is up, and introduce you to Gil Pocker, our experienced Enrolled Agent.
- Review Your Tax Return – First and foremost, take the time to review your completed tax return. This is not about making sure everything is accurate; it is about understanding your financial picture. Look for any potential deductions you might have missed or areas where you can save next year. If you have any questions or uncertainties, this is a great time to consult with Gil Pocker.
- Organize Your Financial Records – Good organization is the backbone of a smooth tax season. Now that you have a bit of breathing room, take the opportunity to organize your financial records. Set up a system for tracking income, expenses, and any deductible items. This will save you time and stress when next season rolls around.
- Check Your W-2 Withholdings – One critical aspect of tax planning is ensuring your W-2 withholdings are accurate. Verify that the amount withheld from your paycheck matches your tax liability to avoid surprises next tax season. Adjusting your withholdings now can help you avoid owing money or receiving a large refund next year.
- Plan for Next Year – Believe it or not, the best time to start preparing for next year’s taxes is now. Consider adjusting your withholdings or estimated tax payments based on this year’s results. This proactive approach allows you many months to make any needed adjustments
What You Can Do Now to Avoid Tax Planning Mistakes in the Future
Since you have just finished and filed this year’s return, the last thing you probably want to do is think about next year’s tax return. But the best time to prepare for next year’s tax return is early in the current calendar year, to allow you many months to make any needed adjustments.
Restricted Stock Units and Large Bonuses
The past decade has seen vast expansion in many privately and publicly held companies, particularly in technology, leading to soaring valuations. These businesses often offer compensation packages that include restricted stock units (RSUs) and large bonuses. While these benefits are valuable, they can also present major income tax surprises without proper planning.
RSUs and bonuses are supplemental income to your regular salary. Bonuses are taxed in the year they are paid, while RSUs are taxed in the year they vest. Companies typically withhold income taxes from these payments, but often at a rate below your actual marginal bracket, potentially leading to under-withholding. This issue can be exacerbated by varying state income tax requirements.
Our Enrolled Agent, Gil Pocker, can help you monitor important vesting dates for your RSUs and plan for potential income tax impacts. Strategies like increasing W-2 withholdings or making regular estimated tax payments can mitigate these issues.
K-1 Income
Income attributed to partnerships on Schedule K-1 can also catch you off guard. This income could be from active business ventures, passive investments, or inheritances. The consequences can be significant and complex if not planned for in advance. Keeping your advisor informed about your business interests and potential investments is crucial to avoiding unexpected tax liabilities.
Capital Gains
If you have sizable gains from investments, consider the method and timing for realizing these gains. Delaying sales of appreciated assets until a year when your income is lower can reduce your capital gains tax. Additionally, consider gifting appreciated investments to charity to obtain an immediate charitable deduction.
Gil Pocker, our EA, can help determine the best realization strategy for your situation.
Residential Tax Property
Owning a home can offer significant capital gains exclusions when selling your principal residence, up to $500,000 if married filing jointly. However, to qualify, you must have lived in the home as your principal residence for at least two of the last five years. This rule can create complexities for part-time properties, vacation homes, and rental properties.
For rental property, be aware of depreciation recapture, which must be reported as ordinary income upon sale. Keeping your advisor updated about your property holdings and potential changes can help you prepare for any implications.
Tax Planning is an All-Year Event
While having more income than expected is generally a good problem, it can create headaches. Tax planning is a year-round event, and it is never too early to start preparing for your next return. At Scout Tax, we help you keep more of your income through proactive planning
Meet Gil Pocker: Your Trusted Enrolled Agent
At Scout Tax, we pride ourselves on offering top-notch services, and a key part of that is our dedicated Enrolled Agent, Gil Pocker. With years of experience and a deep understanding of tax laws, Gil is here to help you maximize your returns and plan. Whether you need advice on complex issues or simply want to ensure you are on the right track, Gil is your go-to expert
Contact Us
Ready to take the next step? Reach out to Scout Industries and the Scout Tax team today. We are here to provide the support and expertise you need for a brighter financial future.
