Save Money With Tax Planning in the Fourth QuarterRichard A. Chapo
November 3, 2008 — 1,401 views
As we work through the fourth quarter of the calendar year, many people put thoughts of taxes on the back burner. After all, you really don't have any major tax filing deadlines coming up until returns are due the next year.
Such an approach is easy to take, but it is a mistake. The fourth quarter is one of the most important tax planning periods of the year. This is the quarter when you do two critical things. First, you look back at the passing year and make any adjustments to your taxes that are needed to avoid a big tax liability at the end of the year. Second, you start forecasting and planning for the next year.
If you are sick of paying taxes, you really need to take a moment to look in the mirror. Can you get out of paying taxes completely? It is unlikely unless you have some unique situation. Still, you can do a lot to minimize your tax hit each year if you would only take the time to get organized and put a plan in place.
Looking back at the past year, how do your numbers match up to what you expected before the year began? Are you up? Are you down? How does this effect your tax situation?
If you are up, you probably need to make a payment before the end of the year to catch up on the difference in the taxes you owe. Alternatively, you may want to cram money into a tax avoidance product like an IRA or 401k. You need to take these actions now. You cannot do anything in April of next year when you realize you owe more than you thought.
If you have seen a down turn in refunds, you also need to do some planning. If you have been making the appropriate payments, you've probably overpaid on your taxes. You might want to reduce or even zero out any further payments for the year. There is little reason to give the government a free loan. After all, it might just give it to a bunch of bankers!
Finally, you need to start thinking about the next fiscal year. How do you see things going? How is the economy going to affect you? Do you need to be pulling back on expenditures or not? If you are anticipating a tough year, cutting your tax payments to create some cash flow may make a difference between going out of business and surviving the year.
There is little choice when it comes to paying taxes. There is a lot of choice, however, when it comes to how much you pay in. Do some planning and you can save a bundle.
About the Author
Richard A. Chapo writes about income taxes for BusinessTaxRecovery.com.