Tax Planning

It's always important to look at your tax situation each year to see if there is something that can be done to help reduce your liablity or plan for next year.

For Individuals

1. Check your health insurance.  If you are covered by an employer, there’s nothing you need to do.  However, if you are self-insured, then you should check with your health insurance agent to make sure you have chosen the most tax efficient and less costly plan. The penalties for not having health insurance will continue to increase. Open enrollment for getting health insurance starts in October.
2. Check your withholding.  An additional .9% Medicare tax is assessed on wages and self-employment income if your wages are over $200,000 for singles and $250,000 for married couples.  Your employer will withhold the additional amounts, but they won’t take into account income from another job or your spouse’s income.  If your income will be above those thresholds and you have income unaccounted by your employer, then you may have not have enough withheld.
3. Do you have lots of dividends and capital gains?  An additional 3.8% tax is assessed on dividends and capital gains for any taxpayers with a gross income of $200,000 for singles and $250,000 for married couples.   Typically, investment income doesn’t have income tax withheld.  Now there’s an additional tax burden.  Now is a good time to sell investments that have lost value and lock in your losses. You can offset other gains and deduct up to $3,000 in losses each year.
4. Are you maximizing your tax deferral plans?  Have you maxed out your 401ks, IRAs, or other available retirement plans?
5. Spring cleaning in the Fall?  A great way to increase your deductions is donate unused or unneeded items to charity.  Make sure you make the donations before December 31st and make sure you grab a receipt.

For Businesses

1. 1. To Defer or Not to Defer – We know the tax rates for 2016 will be the similar to 2015, so business owners need to decide whether they are better off paying more taxes now or later.  Typically, if a business’ income is flat or declining, then the best strategy is to frontload your expenses in 2015 and defer revenue into 2016, if possible.  But, if income is expected to increase, then you are better off recognizing income in 2015 and deferring expenses until 2016.  For example, if the increase in your income moves you from the 25% bracket to the 33% bracket, then a $10,000 deduction will lower your taxes by $800 if you wait until 2016 to make the expenditure. 
2. Check your health insurance.  Obamacare is now a reality.  Make sure you are compliant.
3. Do you have a home office?  You may now deduct a standard amount of up to $1,500 for home offices in lieu of actual expenses.  However, if your actual expenses are higher than you may still deduct those as well.
4. Is your income over $400,000? The highest tax bracket has been increased from 35% to 39.6% for taxpayer with incomes in excess of $400,000.  If you are making estimated tax payments, are you accounting for the increase in the rate?
5. Have you paid yourself?  If you are an S corporation, it’s extremely important to make sure that your salary is proportionate to the income you have taken out of your S corporation.

Please contact us today for a free consultation to see how we can help you with your tax and accounting needs!