Mid-year Tax Planning and Projections
Optimizing finances is a priority for all of us. Mid-year tax planning and projections can benefit your finances by reviewing you the first half of the year and plan for the remainder of the year. The best time to plan is now!
Planning
By assessing income, expenses, and investments, individuals and businesses can identify trends and make necessary adjustments. This proactive approach helps in:
Avoiding Surprises: Identifying unexpected tax liabilities early allows for timely corrective actions.
Cash Flow Management: Planning for taxes mid-year helps manage cash flow, ensuring there are no liquidity issues at year-end.
Many tax deductions and credits require specific actions to be taken before the end of the year. Mid-year planning allows for a comprehensive review of potential deductions and credits, such as:
Charitable Contributions: Planning donations mid-year ensures they qualify for deductions.
Retirement Contributions: Assessing retirement account contributions can help maximize tax benefits and ensure compliance with contribution limits.
Credits and Rebates: Some Oregon energy efficiency incentive credits and rebates require action at the time of purchase rather than at the time of tax filing.
Mid-year is an ideal time to review and adjust withholding and estimated tax payments. Ensuring that enough taxes are withheld can prevent penalties and interest charges. This step is particularly important for:
Self-Employed Individuals: Ensuring quarterly estimated tax payments are accurate based on updated income projections.
Employees with Variable Income: Adjusting withholding to reflect bonuses, commissions, or changes in salary.
Investments have significant tax implications, and mid-year planning provides an opportunity to review and adjust portfolios. Considerations include:
Capital Gains and Losses: Harvesting losses to offset gains can reduce taxable income.
Tax-Advantaged Accounts: Ensuring contributions to IRAs, HSAs, and other tax-advantaged accounts are on track.
Projections
A Tax Projection takes all the important pieces of tax planning and consolidates it into a report to help you assess and compare your options for the rest of the year. A tax projection is a service we offer mid to late year.
A projection can be done to help make a decision and plan action items based on the following examples:
Sale/Purchase of Property for personal or business use.
Determining how much to contribute to retirement funds and other special accounts like SEP IRA, ROTH IRA, 529, investment accounts, etc.
Opening new accounts.
For businesses who are earning/losing more than the prior year.
Gifts and large charitable contributions.
If you have any questions or think a projection may be beneficial for you, please contact us at info@wbcpafirm.com or by phone at 503-295-1939.