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Wednesday, June 7, 2017

Mid-year tax moves to make now

It's summer, the best time of the year to think about your taxes. Really.

A lot of people wait until December to start thinking about their tax bills. True, you can and should make some year-end moves by Dec. 31. But now, halfway through the tax year, is even better for tax planning because you have a good idea of what your earnings will be and there's still plenty of time to take steps that could cut the taxes you'll owe.

So take a quick break to check out these mid-year tax moves. Then you can get back to your leisure pursuits and really enjoy them, knowing you're in better tax shape.

1) Finish Your 2016 Return
First thing’s first; if you received an extension to file back in April, finish up your 2016 tax return now. Sure, you have until Oct. 16 (the usual 15th deadline is on Sunday), but you don't have to wait until the last minute. Finishing up your taxes in a rush, whether in April or October, is a recipe for disaster. At best, you could overlook a deduction or credit that could cut your tax bill. At worst, you could make a filing mistake that could cause problems down the road.

2) Adjust Your Withholding
Did you get a big refund? Are your work and tax circumstances about the same this year as last? Then you might want to adjust your withholdings so that you won't get a big tax refund next filing season. Americans apparently like getting a tax refund, but the ideal payroll withholding situation is to have just enough tax -- not too much, not too little -- withheld from your paychecks to meet your eventual annual tax bill. In this way, you'll avoid writing the U.S. Treasury a check for tax due if you under-withheld, and if you over-withheld, you won't be waiting for a refund check. Changing your withholding is easy - just stop by your payroll office and submit a new W-4.

3) Evaluate Your Estimated Taxes
Estimated tax payments are required if you have income that isn't subject to withholding. It's the IRS' way of ensuring that you're paying as you earn on all your income. By making the four quarterly estimated tax payments a year, you'll help ensure you don't underpay your taxes. That's important because if you owe too much at filing time, you could face a tax penalty. However, you also don't want to overpay your estimated taxes. Summer's a great time to reassess your estimated tax situation. Look at what you've paid via your April and June 1040-ES filings and see whether your schedule is still on track. If not, you can adjust your upcoming September and January estimated tax payments

4) Hire a Tax Professional
Whether you need a tax expert's assistance to finally file your extended 2016 return or you're looking for help in getting your 2017 tax act together, now is the time to hire someone. The filing season crunch is over, meaning that all types of tax professionals have a bit more time. It also gives you time to determine exactly which type of tax preparer fits your tax needs.