Don’t Take a Summer Vacation from Finances: How to Start Tax Preparation During the Summer

Don’t Take a Summer Vacation from Finances: How to Start Tax Preparation During the Summer

Summer Tax Preparation Will Put You Ahead of the Game

Summer? Taxes? These two seemingly unrelated subjects have more in common than you might think.

While most of us don’t think about taxes until the snow starts to melt, tax preparation doesn’t have to wait until early spring. In fact, it’s a good idea to keep tax preparation on your radar all year long – even summer. Summer marks the halfway point of the calendar year, making it the perfect time to assess your financial health, document your spending, and get a gut check on where you might be going astray. Here’s how you can get ahead of the tax preparation game this summer (we promise it won’t be that painful)! 

Check Your Withholding Taxes
Have you had any qualifying events in the first half of the year, like a marriage, divorce, or birth of a child? If so, how much money you withhold from the government each paycheck may need to change. You might be paying too much or too little depending on your life event. Everyone should notify their employer when a life event happens, but it’s extra helpful to do so as soon as it happens so that there aren’t any surprises when you go to file taxes in the spring.

Revisit Your Education Planning
While you have a break between semesters or the kids are off from school, think about your education planning. You can take advantage of a variety of different tax credits and deductions related to your educational spending. Understanding how much you might be able to save or get back can help inform your choices for the school year ahead, including how many credits to take or how much you’ll need to save for your own student over time.

Tackle Your IRS Extension or IRS Notice
Did you get something in the mail from the IRS? Did you file for an extension back in April? Take time this summer to tie up all loose ends from your previous tax filing – you don’t want to find yourself beyond a deadline! IRS extensions are typically granted for up to six months, which means you only have until October to complete them. If you have to pay the IRS money, you should also pay as soon as possible. Don’t let the summer slip by without making a dent!

Determine Your Charitable Donations 
Instead of estimating all your charitable donations for the year once tax season rolls around, you can submit a more accurate estimate if you take the time to calculate your donations at the year’s halfway point. This will help you make sure you don’t forgot things, like those smaller donations you made for your work’s charity cause or that bag of clothing you donated back in February. Ultimately, the more you can document, the more you can deduct!

Turn Up Your 410K Contribution
Are you putting as much as you could into your 401K account? The money that’s pulled out of your paycheck and pulled into your 401K account is pre-taxed money and isn’t eligible for taxation when you go to file taxes. So, the more you put into your 410K, the lower your taxable income.

If you commit to doing just one of the above five summer tax preparation tips, you can be in better shape come next spring! All it takes is a little focus and visions of heftier tax returns to stay motivated. For more tax preparation advice and service, reach out to the experienced tax professionals at Tobin & Collins.