Getting a head start on 2020 tax planning2 min read • May 01, 2019
If you have already filed your taxes, it may be nice to finally focus on other priorities. While it’s easy to cast your tax planning aside, there is no better time to get ahead. With last year’s mistakes fresh on your mind, simple changes won’t take long. Here are a few easy ways to get started on next year’s tax planning.
Double-check your withholdings
If this year’s tax bill was a costly surprise, now is the perfect time to review your federal income tax withholding. It may be tough to remember, but you filled out a W-4 before you started working at your current job. Your paycheck — and how much the government takes out for taxes — depends on the number of allowances you chose.
Luckily, the IRS makes it easy to give yourself a “paycheck checkup” with their free withholding calculator. Taking a few minutes to make sure you are withholding enough, it is well worth your time. You will be relieved when there isn’t a shortfall to cover next April.
Adjust your 401(k) or 403(b) contributions
There are a lot of reasons to feel good about
your 401(k) or 403(b). Making contributions to either of these plans reduces
your taxable income. They also make saving for retirement a breeze through the
power of automation.
You can’t spend what you don’t see. It probably won’t derail your budget to increase your contributions by 1 or 2 percent. If that is more than you can afford, it may be time to look for ways to reduce your monthly budget. You may be eating out or shopping on Amazon more than you expect. A few adjusts will make a big difference. You will be pleased to see how quickly your account grows and how much you save on taxes.
Create systems to stay organized
One of the biggest headaches at tax time is the flurry of paperwork. Receipts, statements, and 1099 forms never seem to be within reach when you need them. Getting organized doesn’t have to be a yearly battle.
Start by making a checklist of all the paperwork you had to track down this year. If you are feeling extra ambitious, jot down when you received them. Keep a folder for any documents that may be tax related. It’s easy to carelessly throw away receipts for home repairs, education expenses, charitable donations, or medical bills when you don’t realize you need them. By putting these systems into place now, you will be one step ahead of next year’s onslaught of mail.
It’s never too early to get started on taxes
Starting now may feel like overkill, but tax planning should be top of mind all year long. By the time next season rolls around, you may have already missed out on ways to save. It may even be too late for some of the easiest ways to reduce your tax bill. Being proactive pays off. You will rest easier knowing more of your hard-earned dollars are going back into your family’s pockets.