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Important Tax Planning Steps

Many taxpayers believe that after tax season, it is time to take a break from thinking about taxes and look forward to summer vacation. But before you start planning those getaways with family and friends, there are some steps you should take to help put you in a better tax position next year. Also, if you are a small business, there are filings you are probably required to do throughout the year. Tax Return

Here are some steps you should take over the next couple months to make tax season less painful next year:

Consider your Tax Withholding: By now, you have probably received your federal tax refund if you had one coming this year. If you ended up receiving a fairly large amount this year, it might be wise to consider changing the number of withholding allowances you have through your employer. Many taxpayers believe that getting a large refund is good. And while it may be nice to receive a large sum of money, it actually amounts to giving the IRS an interest-free loan.

It is better to withhold less money now and put the extra you receive each paycheck into a savings account (or better yet invest it) and allow that money to grow and compound. However, if you believe you lack the discipline to save and look forward to that large refund every year, then it may be best to leave it alone.

Manage your Income Level: It is important to understand roughly how much income you are earning and your tax bracket, so you can effectively manage your income level. No one is suggesting earning less money, but you can employ certain strategies such as deferring part of your income or bonuses to next year and putting more money into tax-deferred savings accounts.

Maximize your Tax-Deferred Savings: Whether it is part of an income tax bracket management strategy, a strategy just to lower your overall taxable income or simply to put away more for certain future needs, there are numerous reasons to park as much money as possible into tax-deferred accounts. Take a look at any retirement accounts, college savings plans, health savings accounts and other accounts you may have and look at ways to put the maximum you can possibly afford into each one. You will definitely thank yourself later for this lifestyle adjustment.

Pay Estimated Quarterly Taxes: If you are a small business with any meaningful earnings, there is a good chance you are required to pay quarterly estimated income and self-employment taxes. If you fall into this category, the due date for second quarter 2015 is Monday June 15. If you are not sure if you should be paying estimated quarterly taxes, speak with a tax professional and ensure you are in full compliance with all applicable tax guidelines for your business.

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