Tax Check Up: Life Changes That May Impact Your 2016 Taxes

As we approach the end of summer, it is always a good idea to take a look at where you stand tax-wise, so you know whether or not you need to make some adjustments. Certain life events can incur tax consequences, and it is best to address these now, while you still have several months remaining in the year.
Here are some questions to ask that may compel you to make some adjustments as we enter the final 6629120915_556a318093_mstretch of 2016:
Has your Income Level Changed?
If your household is receiving additional income from a raise, a second job, your spouse going back to work, or side income from doing some subcontracting, you may
be getting close to entering a highertax bracket. If that is the case, you may want to lower the number of exemptions on your W4 so you
will have a higher amount withheld to cover the increase in tax liability. You may also want to speak with your accountant about strategies to help avoid falling
into a higher tax bracket, such as contributing more to an IRA, 401K, or another pre-tax investment vehicle.
Has your Employment Changed?
If you have changed employers during the year and have a 401K from the old emplo yer you plan toroll over to a new one, be cautious how you handle this cha
nge. For example, if you have the proceeds from the old 401K paid directly to you, 20% will be withheld for
taxes. And if you do not reinvest into a new qualified retirement plan within 60 days, you will be responsible for the 20% tax plus an
additional 10% penalty if you are under the age of 55.
Have you Changed the Number of Dependents during the Year?
If you have a new addition to the family or a child leaving the house, you may need to look at changing your withholding exemptions on your W4. If you are unsure whether you can still claim as a dependent a child that is going off to college, the general rule is you still can as long as he/she is a full-time college student and under the age of 25. For those who are no longer attending college full-time,the cutoff age is 19.
Has your Marital Status Changed this Year?
If you were (or plan on getting) married this year, your filing status will likely change to Married Filing Jointly. On the other hand, if your marriage is dissolving, you will be filing either Single or
Head of Household. Either way, there are tax consequences, and it is important to adjust your W4 exemptions accordingly.
Did you Start a New Business this Year?
Starting a business opens the door to a wide range of available tax deductions. For example, if you operate your business out of a home office, you may qualify
for a home office deduction. You can also deduct business-related expenses such as business miles driven, hotels, transportation, 50% of meals and entertainment, advertising, legal and accounting fees, and many others. Speak with your local tax accountant to find out which specific business tax deductions you may qualify for, and how to ensure your overall tax liability is held to a minimum



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