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Why You Should Think About Your Taxes All Year

It's summertime, and like me, I'm sure you know this is the perfect time of year to be thinking about your taxes. Ok, seriously, I know you're NOT thinking that, but here's a few reasons why you should be.

you haven't filed last year's taxes yet

If you filed for an extension, you're halfway through your extra six months. Don't let October creep up on you! Take time to gather everything you need and take advantage of having some free time over the summer to finish them up. You don't have to wait until the deadline to file. Get it done now.

you got a refund this year

If you got a refund this year, you hopefully put it to good use like increasing your emergency fund or paying down debt. You've also put steps in place to avoid having a big refund next year, because now that interest rates are up, you're losing money by having what I call an "IRS Savings Account". 

you owed money this year from 2018

Because 2018 was the first tax year under the new rules, a LOT of people owed more than normal, or owed when they usually got a refund. Owing money leaves you open to being assessed a penalty. I normally recommend clients shoot for getting a small refund so they don't have that risk. You may need to pay estimated taxes throughout the year, or ask your employer to withhold more the rest of this year. Check out the IRS withholding calculator to estimate where you're at now that the year is half over. 

you changed employers (or work for more than one)

Many people underestimate how changing employers or having more than one job impacts their taxes. Once you start a new job, your new employer's payroll system doesn't know anything about your previous employment or other jobs. This means the taxes withheld are based on this job only. At the one end, you could have nothing withheld because you're not making enough at this job. At the other end, you could have been over the SS max at your previous job and now have to start over - getting money withheld in your paycheck that you won't see again until you get your refund next year.

you're making more money (or less) than last year

If you're making more this year, you may phase out of deductions you claimed last year like the student loan interest deduction. You may also be unable to directly contribute to a Roth IRA account because you've reached the  income limits. If you've already made those contributions this year in error, you'll have to withdraw your excess contributions. On the other hand, if you're making less, you may be eligible for additional deductions and credits, and want to plan to make additional retirement contributions or conversions. 

you bought or sold real estate

Buying or selling real estate can affect your taxes - whether its your primary residence or a vacation or rental property. It's important to understand how any gains or losses may be treated, and how property taxes and mortgage interest paid may be limited under the new 2018 tax rules. If you bought property, you may be eligible for additional itemized deductions, and will want to understand whether it makes sense to take the standard deduction or itemize. 

you moved

Whether you moved for a job or personal reasons, you will want to understand if you're eligible to deduct your moving expenses. You also may pay more or less state and local taxes than you did before, and you will want to understand how your new situation will affect how much you'll pay in federal taxes. If you moved from a high-tax state to a low one, it may no longer make sense to itemize. If you moved to a high-tax state, you might want to itemize when you didn't before. Other state tax deductions such as contributions to 529 accounts may be different than what you're used to, so double check when you move.

If you have any questions about how any of this applies to you, then reach out and schedule time for us to chat!