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Blog » Effective Tax Planning Tips for Businesses and Individuals for the Remaining Year 2018

Effective Tax Planning Tips for Businesses and Individuals for the Remaining Year 2018

Last updated: 29 Nov, 2023 By | 6 Minutes Read

tax planning tips

So, US citizens have concluded yet another tax return filing season. How the last thing they want to have on their mind at is new tax reforms. However, it is never too early to begin tax planning for the future. Let’s explore the top tax planning tips that will help you meet he compliance goals.

Effective Tax Planning Tips  for Businesses and Individuals

Check Your Tax Return With a Certain Level of Cynicism

It is usually a wise idea to overview the tax returns. Whether individual or business, if you have hired a tax preparation company to do it on your behalf.  Contribute more towards your retirement plans, keep an eye on additional deductions, and re-check financial withholdings. It is one of the effective tax planning tips for businesses to stay ahead in the market.

A warning: Your situation may possibly differ in the year 2018 in comparison with 2017. Remember, the outcomes of current tax reform differs. Needless to say, the increasing of the standard deduction may imply fewer people getting itemized.

This would make way for opportunities like ‘bunching’ deduction. It will also twice your expenditures to qualify for the deductions. For instance, bunch deductions work well in case of charitable deductions. That’s where people have substantial flexibility to the money they give as a donation and timing.

Consider Capital Losses

The stock market has been up for about 9 years now and luckily investors did not face a lot of money-losing situations. This may not be the case now considering the fact that market could be spending most of their 2018 in the red. Therefore, it is advised to re-invest the proceeds into anything else apart from the stock market.

In other terms, a realized loss offsets the realized gain with regards to the tax dealings. If your losses surpass your gains, up to 3000 USD of the excess amount can be subtracted from the usual earnings yearly. However, if the losses are more than 3000 USD, you can carry them forward to the subsequent years. These stipulations relating to the capital gain and loss scenarios were not impacted by the tax reform.

FACT: According to a survey by Buzz60, it has been found out that 51% of the US citizens approve of the latest tax reform and this figure has been increased this year from 37%, which was calculated in December.

Take in Account Roth Conversions

Generally, any kind of withdrawal from Roth Individual Retirement Account does not levy any tax. Therefore, Roth withdrawals are not going to guide you in a higher tax slab and they would not possibly impose any taxable amount on your Social Security advantages. A reliable tax planning tips for businesses and individuals.

The prominent downside, whenever you transfer or “convert” conventional IRA funds into a Roth, is that you have to pay tax on the sum of money that you are moving. Nevertheless, with the equity markets flat to lower, now may be a good time to do so. Furthermore, courtesy of the tax reform, average income-tax rates are shaved, therefore the tax bite is likely to be a little less than previously. If you opt to carry out a Roth conversion, make use of non-IRA funds to cover the costs of it.

Become organized

It is aggravating to discontinue what you are doing and look for bills as well as statements to file an accurate tax return. In such cases a certain level of organizational forethought could actually be of great help.

It is wise to have a solid record keeping model for submitting bills and statements all year round. Create replicates of your returns and keep them in a secure spot for future reference. For those who have digital copies, look into options like storing them up on the hard drives, cloud-based platforms, or perhaps additional programs, that are independent of your PC (that can get hacked or stolen).

The general guideline here is to keep tax returns as well as all the other supporting paperwork for a minimum of 3 years, although a number of items must be held for a longer time like records demonstrating the amount of money you invested in your house or other acquisitions, particularly when you haven’t traded them till now.

Come Up With Tax-Refund Strategy

If you like most other people have obtained a refund and have spent it for either paying off your loan or deposited it in your savings account, it may not be a viable plan for the next year as the refund for the subsequent year could be lesser. If you are amongst the people who depend on their tax refunds to get their finances in order, it is better to devise a backup plan.

Furthermore, make up your mind if you want to continue getting a large amount of tax refund every year and make every possible effort to keep up with the amount then. Refunds are good; however, they signify interest-free loans, as well.

Keep an Eye on State-level Changes

Tax reform enforced at the federal levels is going to have an effect on state tax rules, as well. Over 50% of the US states link their tax codes with federal guidelines and often make changes depending on what takes place in Washington.

Tax reform has taken away a number of exemptions as well as deductions at the federal levels. However, it additionally reduced federal income-tax rates. On those grounds, a lot of states will have to reduce their individual tax rates to limit citizens. This tax planning tips is no longer beneficial to itemize from having to spend more. States that have a large amount of estimated revenue increase on account of federal tax reform comprise of Nebraska, Minnesota, New York, Georgia, Michigan, Maryland, Colorado, and Arizona.

Looking for more clarity on the latest tax reform or perhaps seeking external help to prepare tax returns (business or individual), get in touch with our expert team at Cogneesol! You can call us at +1 833-313-3143 or email us at [email protected].

Read Also: S Corporation – A Comprehensive Guide to Filing Taxes