With just a little bit of tax preparation and organization, filing your taxes can actually be a lot easier than you think.
Most Canadians dread tax time and even consider hiring an accountant to complete their taxes, since prepare them can seem confusing and intimidating. If this is you, we have good news. Creating a year-end plan allows you to tackle your taxes the way you should in an organized and methodical way.
Planning out your taxes and taking a solid approach to filing can help ensure that there are no errors, since you’ve done everything right.
To learn more about putting together a year-end plan for your taxes, read on!
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Make Business Decisions That Affect Tax Liability While You Still Can
Creating a year-end plan for your taxes is the best way to make business decisions that affect your tax liability while you still can. Year-end planning allows you to make informed strategic decisions that can help you better manage your tax liability, save money, and protect your business.
You can determine the most advantageous timing for decisions throughout the year that can have a beneficial effect on your taxes. Making decisions can aid in realizing deductions and credits, optimizing retirement contributions, capitalizing on new laws and IRS regulations, and minimizing your overall tax burden.
Additionally, year-end planning gives you the opportunity to plan ahead for potential challenges such as an audit or a change in the tax law. Finally, the earlier you plan the better prepared you will be to handle changes.
Prepare a Projection to See What You Might Owe
Creating a year-end plan for your taxes is a great way to prepare a projection to see what you might owe. This will give you plenty of time to plan ahead so you’re not caught off guard when it comes time to pay your taxes.
By creating a projection of what you might owe, you can budget accordingly and start paying taxes in time. This will also help to prevent any long-term issues from occurring if you wait until the last minute.
Not only that but you can also avoid any penalties or interest that you would have paid due to delayed payment of taxes. If you fear that you won’t have enough money to cover your taxes, you can also start to plan and adjust your budget to plan for the upcoming tax season.
Decide if You Should Increase Spending Before the End of the Year
Creating an end-of-year plan for taxes helps you decide if you should increase spending before the end of the year. Doing a thorough review of your financials now can make the tax season a much more manageable and less stressful event come spring.
By analyzing your available deductions, assessing your filing strategy, and estimating deductions, you can create the most tax-advantaged plan for you. Additionally, you can maximize deductions and planning opportunities to reduce taxable income or secure potentially greater refunds.
If there’s opportunities to save money, the end of the year is a great time to make bigger investments with the intent of collecting the benefits at tax-filing time. Making sure that you create a detailed year-end plan before you decide to increase spending will help you make informed financial decisions that benefit you come the new year.
Decide if You Should Defer Income Until Next Year
Creating a year-end plan for your taxes can help you decide if you should defer income until the next year. This could be beneficial for some taxpayers because it can help lower taxable income, which in turn could result in a lower tax bill.
Earning income late in the year does not have to result in all of that income or even most of that income being taxed in the current year. By creating a year-end plan, a taxpayer can decide in advance which strategy to use to defer income and thus lower the tax bill.
This can be especially beneficial for those who may work on the side as freelancers or consultants and don’t know what to expect from their income. Having a year-end plan in place can give them some direction and insight as to whether they should defer income, receive it all in the current year, or take some other approach.
Identify Opportunities to Decrease Tax Liability
Creating a year-end plan will allow you to take a thorough analysis of your finances which will help you identify opportunities to decrease tax liability. By analyzing last year’s tax return, you can develop a plan to lower your tax bill this year.
This analysis allows you to determine whether certain deductions and credits are available to reduce the amount of tax you owe. Additionally, a year-end plan can help you assess whether you should make additional contributions to retirement plans to lower your taxes.
Year-end planning also helps you identify potential investments to use to reduce your taxes. Properly investing can result in lower taxes by increasing additional deductions and reducing total taxable income. Making a year-end plan provides you an opportunity to structure your finances to your advantage and to reduce the amount of taxes owed.
Figure Out What You Should Do Based on Changing Tax Rules and Regulations
Creating a year-end plan for your taxes can be an invaluable step in understanding the changing tax rules and regulations that have an impact on your finances. It is important to understand what updates and amendments have been made to the tax code, and accordingly plan what should be done.
A proper plan also helps to create a system in smooth compliance to tax laws and correct reporting of income. By having a year-end plan, you can ensure that you are staying up to date on all the pertinent information and making the right decisions.
Reap the Benefits of Year-End Plan For Your Taxes
Creating a year-end plan for taxes is a smart move for any individual or business. The plan can help ensure that your taxes are submitted on time, that deductions are maximized, and that you are not paying more in taxes than necessary.
Take the time to create a tax plan today and benefit from the potential tax savings.
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