Attention IC Tax Clients! 10 Things To Prepare Yourself For The New Year.

As the end of the year draws near, we are left to reflect on the past year and look toward the future. One important aspect of the future is your financial future and there is no better time to prepare than before the New Year starts.

We want to take this opportunity to remind you of a few topics that can require your attention as 2015 comes to a close.

Health Care

It’s time to consider the health insurance you will be purchasing for 2016. As you know, federal law dictates that you must obtain healthcare or face penalties. The open enrollment period started on Nov 15th, so if you want to make a change to your healthcare, it’s time to do it now!

(FYI–self employed persons that purchase their own health insurance plans are able to claim the premium payments as a business deduction.)

Retirement Planning

End of the year tax planning

Now is the time to make any last contributions to your retirement plan before the fiscal year ends. Doing so will lower your taxable income and potentially lower your tax bracket. Talk about major benefits with the added bonus of preparing for your future! Depending on your account type (401k, IRA, etc), you may need to run it through payroll, so reach out to your tax advisor to discuss.

New Year Retirement Planning

Whether you’re considering opening a retirement account, or looking to recalibrate your retirement savings, the beginning of the year is the most ideal time to tackle this issue. It is far easier to contribute throughout the year than to play catch up at the end. For those with Solo 401k accounts (which we often recommend for S corporation owners), it is of even greater importance that you start making contributions at the beginning of the year, because contributions to your 401k account have to go through payroll and there are  limited opportunities to contribute as the year progresses.

If you aren’t sure how to move forward, or are unclear on which retirement plan is best for you, please contact your CPA, so they may advise you on your options.

Charitable Contributions

Charitable contributions can only be deducted within the calendar year they were made, so if there are any charitable contributions you wish to make, whether to support a good cause or just to lower your taxable income, December is your last chance to do so.

Stock up on supplies

If there are any upcoming business expenses that you can foresee coming in the near future, why not maximize on your deductions, and make those purchases before the year end comes. It is a great way to get prepare for the coming year, while lowering your tax burden.

Expense Reimbursements

If you are the owner of an S corporation it is important to turn in any expense reimbursements that you have been sitting on to your bookkeeper before your CPA files your taxes for 2015. Getting those business expenses on your books will help maximize your deductions and you can take advantage of what is, essentially, free money! Who doesn’t love that?

Q4 Estimated Tax Payment

Remember that your Q4 estimated tax payment is drawing near, the due date for which is Jan 15th 2016. We will remind our clients of the due date and provide directions on how to make the payment.

Review your personal situation

Has anything changed in the last year that could impact your tax situation? The following are just a few instances where these changes could have significant impact on your tax strategy:

–Were you recently married?

-Was a child born in the last year?

-Has your child reached an appropriate age that you could put them to work to create tax free income? (10+ years)

-Has a parent moved in with you, because they require assistance? Or have you taken in any other new dependents that could be adding to your dependent list?

If any significant changes have occurred in your life in the last year that you suspect could have tax implications, please speak to your CPA to discuss your options and the strategies that might be employed to save you even more taxes.

Look at your financials

Because we use a cloud-based program for your bookkeeping, you have the ability to look at your financial records and make sure things are orderly and accurate. Take some time to look through your financials and inform your bookkeeper of any concerns or changes that need to be made.

If you need something explained or have a question about your financial information, don’t hesitate to reach out to your bookkeeper. They are ready and more than willing to address any questions or concerns that you may have.

Defer Income

Income is taxed the year that it’s received, but why pay taxes on some income now, when you can pay it later? If you want to lower your taxable income for this year, simply delay invoicing until late December, that way you are guaranteed not to receive payment until the new fiscal year.

Of course you wouldn’t want to use this strategy if it could push you into a higher tax bracket for 2016, by deferring income to next year. However, if you are confident that you will be staying within the same tax bracket from this year to the next, why not push it to next year, and lower your taxes now?

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These are just a few things to consider as the year comes to a close and there are others that might affect you depending on your facts and circumstances. If you have any questions about anything, please reach out to us as we would be happy to help.

At Independent Contractor Tax Advisors we want to thank all our clients for your loyalty and trust over the course of this year and would like to wish you all good fortune in the coming fiscal year!  

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