A Tax Planning Checklist: How to Avoid Surprises and Stay Compliant
April 8, 2024 | QC Business Leaders Excited to Host ‘Getting Down to Business'
Filing your tax return can be a daunting task, especially if you’re not sure what to expect or how much you’ll owe. If you’ve just filed your tax return and were unpleasantly surprised, don’t worry. There are several things you can do to make sure you’re not caught off guard next year.
- Be realistic about your withholding – If you’ve received a promotion or experienced a significant rise in income, it’s a good idea to update your Form W-4 with your employer. Keep track of your withholding if you’re investing or eligible for bonuses. Use the IRS online withholding calculator to determine the optimal amount.
- Consider estimated tax payments – If you work in the gig economy or have a side hustle, you should consider making estimated tax payments. Gig work is not subject to withholding and may lead to an unpleasant surprise on your tax return. While estimated payments are due four times a year, some people choose to make monthly payments.
- Run the numbers – In December, review all your income statements, pay stubs, and investment information to create a mock tax return. This will help you identify any surprises and adjust your finances accordingly.
- Consult an experienced advisor – If you have a significant amount of non-W-2 income, it’s a good idea to speak with a tax professional. They can provide advice on minimizing your tax liability and staying compliant with tax laws.
- Budget accordingly – Don’t forget that you may owe taxes sometimes. If you’ve had a profitable year in business or made a significant investment, set aside money in your budget to cover your tax obligations.
Remember to keep an eye on your withholding, consider estimated tax payments, run the numbers, consult with a professional, and budget accordingly. By doing so, you’ll be well on your way to staying compliant with tax laws and minimizing your tax liability.
By being proactive and taking these steps, you can remain informed about your tax situation and avoid any unpleasant surprises come tax season.
Eide Bailly’s experienced team is here to make taxes less... taxing. Whatever your business needs – we can help. ABI