Planning For An Easy Tax Season...before the holiday rush

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I don't know about you, but December has taken me by surprise again this year. And even while I get excited about the holiday parties and our traditional Christmas breakfast of strawberries and biscuits, I am also suddenly aware of those end-of-year deadlines. Unless you've been really diligent this fall, here are some simple tasks that will keep you from following up your holiday recovery with panic attacks:

  1. If you are a business owner, you need to think about your annual reports for the state, as well as taxes. Here in Massachusetts the reports are often due in the fall. If you missed the deadline, the penalty is small, but you will want to get those in before they get lost in the taxes. Here is your link to the MA state filing forms & instructions.
  2. Planning ahead can often save you on taxes. I know you've heard this before, but this is the moment to actually do something about it. Contact your financial planner or accountant now to see whether it makes sense for you to: sell some investments at a loss (to offset other income); sell some at a gain (if, for instance, you think your tax bracket will be higher for 2016 than it is for 2015, or you would rather pay this year); make some charitable donations or gifts to the family; make a big purchase for the business before December 1; set up a trust.
  3. Put a little more in your retirement account. Now that you've reached the end of the year, you may find that you can afford to put a little more money into your 401k, IRA or other active retirement plan. The IRS allows many retirement contributions to be made anytime up until you pay your taxes, BUT your plan may well have an earlier deadline. Make your contribution by December 31st to be sure.
  4. Set aside some cash if you've had any unexpected income this year. Most people count on the money deducted from their paychecks to cover the taxes that will be due on April 15th. But if you've received money from a side job, from shares in a business, from the sale of some investments, or if you just received a large gift or prize, you probably owe extra taxes. Plan now to keep some cash aside in your account to cover those. And, if this happens regularly, talk to your accountant about paying quarterly estimated taxes to avoid penalties.
  5. Get those receipts together. You probably won't get all of the paperwork you need to file your taxes until January or even February. This stuff includes everything from W2 statements to health insurance coverage certificates and bank or investment tax statements. But you can get your tax receipts in order before the holiday and be ready to turn the whole mess over to your accountant as soon as the paperwork comes in. You will be especially glad you did if you are the tax preparer for your household.

Last but not least, make sure you know who is going to prepare the taxes for you and how. If you are one of those brave do-it-yourself tax filers, go ahead and purchase the tax software now. It's ready and waiting for you.

If you hope to turn this problem over to a professional, keep in mind that these folks get harder and harder to find as April approaches. Ask for referrals to a good accountant in your  area (your financial planner always keeps a list) and make contact now.

When the early spring finally hits, you could be enjoying warm sun and daffodils instead of a shoebox of fading receipts and late night caffeine fixes.

Five Reasons to Think About Your Finances in August

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I admit it. This post is probably more for my entertainment than yours, but I stand by my points nonetheless. So, here they are: 5 reasons to think about your finances in August:

  1. It's been six months since your heating bill was enough to make your fingers go numb (or was that just the draft from the window?). So at this point, you are thinking your household budget isn't nearly as bad as you thought, and you might even get that sense of smug responsibility looking over the household finances without the wincing (and numb fingers);
  2. Your accountant can actually talk to you at this time of year. I know—it's great fun for everyone involved when we all gang up on the accountants at once in March and April (and in October for the businesses, by the way). Accountants love that. But you'd be surprised how much more relaxed they are taking your questions in August;
  3. You can actually do something about your finances in August. Don't get me wrong, you can worry about your finances in December and January after the Christmas shopping. And you can wish that you'd started that IRA account, put money away, paid for last year's tax-deductible whatever in April, but wouldn't it be great if you did any of things before the regret set in?
  4. You can amaze your neighbors and friends. Everyone is either on a fabulous vacation in Buenos Ares or trying to recover from the annual family trip to the beach by this point in the summer. If you have kids, the anticipation of sending them off to school is starting to make you antsy and unfocused (just think of the free childcare!!!). No one but no one does anything particularly practical in August, really. Revise your household budget, put a little extra in the investment account, meet with your advisor or accountant and then go sit by the pool mouthing off about how you took care of all that. And keep in mind that this sort of shameless boasting goes down especially well when you are sipping an umbrella drink;
  5. You can have ice cream after. Yes, technically, you can have ice cream before or even while you are working on your finances (though, watch the dripping), but it tastes really, really good when you're done.

Happy vacationing, everyone.