Next April – and cooler weather - may seem far off, but this may be an excellent time to think about tax-saving possibilities while you have plenty of time to explore your options.
Consider making tax moves earlier rather than later.If you own a business, earn significant investment income, are recently married or divorced, or have a Flexible Savings Account (FSA), you may want to work on your income tax strategy now rather than in December or April.
Do you need to pay estimated income tax? If you are newly retired or newly self-employed, you will want to be familiar with Form 1040-ES and the quarterly deadlines. If you make estimated tax payments to the Internal Revenue Service, they are due on or before the following dates: January 15, April 15, June 15, and September 15. These deadlines are adjusted to the next available workday if a due date falls on a weekend or holiday.1
Ideally, you would just make four equal payments per year – but if you are a small business owner, your business income could vary per quarter or per season. The risk here is that you will underpay and set yourself up for a tax penalty. Confer with your tax professional to see if you should adjust your estimated tax payments for current or future quarters.1
Has your household size changed? Is there a new addition to your family? If so – Congratulations! This calls for a look at your pre-tax withholding. No doubt you would like to take home more money now rather than wait to receive it in the form of a tax refund later.
Adjusting the withholdingon your W-4 may bring you more take-home pay. Ideally, you would adjust it so that you end up owing no tax and receiving no refund. You can adjust it at the I.R.S. Tax Withholding webpage, or via a paper W-4 form.2
Are you using your FSA dollars before the end of the year? The Department of the Treasury has modified the rules for Flexible Spending Accounts (FSAs). The I.R.S. now permits an employer to let an employee carry up to $500 in FSA funds forward into the next calendar year. Alternately, the employer can allow the FSA accountholder extra time to use FSA funds from the prior calendar year (up to 2.5 months).
Companies do not have to allow either choice, however. If no grace period or carry-forward is permitted at your workplace, you will want to spend 100% of your FSA funds this year.3
Are you making maximum contributions to your 401k or other retirement accounts? IRAs and non-Roth workplace retirement plans arefunded with pre-tax dollars. By directing money into these retirement savings vehicles, you position yourself for federal tax savings in the year of the contribution. If you are able to make the maximum traditional IRA contribution of $6,000 in 2019, and you are in the 24% tax bracket, that may allow you to claim a $1,440 federal tax deduction for 2019.4
There are additional options to save in your IRA’s including catch-up contributions if you are over 50. We welcome any questions you may have about how to maximize savings in your retirement accounts.
Please call us at (770) 977-2434, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or visit our website at http://afainvestments.com/
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - web.blockadvisors.com/estimated-tax-payments-2019/ [5/23/19]
2 - turbotax.intuit.com/tax-tips/tax-refund/top-5-reasons-to-adjust-your-w-4-withholding/L8Gqrgm0V [5/23/19]
3 - investopedia.com/ask/answers/111615/does-money-flexible-spending-account-fsa-roll-over.asp [5/21/19]
4 - fool.com/retirement/2018/12/23/the-6-best-tax-deductions-for-2019.aspx [12/23/18]
