Financial Planning

Tax Planning

Most Americans dread April 15 when the deadline looms for filling out federal and state income tax returns. Those who owe money at tax time frequently vow that they’ll be better prepared “next year.” It’s a popular New Year’s resolution for people to promise themselves that they’ll keep better records and pay closer attention to possible tax-saving measures.

Unfortunately, many people don’t know how to follow through with that commitment. As a part of the financial planning process an HFS advisor working with a Hantz Tax a Business tax specialist can map out a plan to minimize your taxes as well as plan future events knowing their tax effects.

Hantz Premier Planning service is unique in the industry. In addition to the other key areas of financial planning your personal financial advisor and your tax specialist will create a plan to help reduce your taxes and help you put more of your resources towards your goals.

Tax planning is a year round effort. Here are few ideas to get you started.

Get organized.

Create a file for records you’ll need at tax time. Start by filing your pay stubs. Don’t wait until your employer issues a W-2 income and withholding statement at the end of the year. Keep a running total of your income and withholding. These figures will provide a rough idea of how much you expect to have earned and withheld by year’s end. Remember to include sources such as bonuses, stock sales and your spouse’s earnings when computing income. If you’re on track to earn more-or withhold less-than last year, it could mean that you’ll owe more money at tax time. There might still be time to adjust your withholding at the company where you work. On the other hand, a big refund means you’ve given the government an interest-free loan all year.

Self-employed?

Remember, the rules differ if you’re self-employed. Deadlines for opening a Simple IRA, SEP-IRA or Keogh plan may be different. You’ll have greater withholding and reporting responsibilities.

Save those receipts.

Get in the habit of saving and filing receipts for your purchases and charitable contributions. Contributions to qualifying charities will probably be deductible. (Don’t forget your non-cash donations of clothing and household goods.) Medical and dental costs, including prescription medicines, may qualify for deduction, depending on the amount. Similarly, other types of expenditures may be deductible if they meet specific criteria. Keeping track of what you spend will help in setting up a household budget, even if expenses are not deductible.

Be alert to changes.

Will you be welcoming a new baby into the family during the tax year? Do you or a family member expect to start college? Have you received an inheritance or other monetary windfall? Do you expect to buy a home, get a raise, start a new job, get married or divorced? These are just a few examples of life-changing incidents that should prompt you to re-examine your income tax strategy.

Pay attention to deductions.

Some commonly overlooked deductions that may or may not apply to your situation include:

• Using a home equity loan or home equity credit line instead of credit cards. Unlike the interest you pay on credit card debt, the interest you pay on your mortgage or home equity loan is probably deductible-and comes with a more attractive interest rate.
• Maximizing your retirement savings and pre-tax contributions at work. Do you qualify for an IRA? Does your employer offer a 401(k) or 403(b) retirement saving account? Consider having the maximum amount allowable deducted from your paycheck, especially if your employer offers “free money” in the form of a lucrative match. Your company might also offer other pre-tax benefits. Check with your human resources professional.
• Meeting deduction thresholds. Medical expenses and some other types of expenses only qualify as deductions if they meet a specific percentage of your adjusted gross income. If you anticipate large medical bills this year, consider going ahead with other medical expenditures in the same tax year. Bundling these expenses could help you meet the government's threshold for deductible expenses.
• Don’t forget job-hunting expenses. Are you looking for a job? If so, you can probably claim a deduction for related expenses, even if you’re currently employed. Overlooked job-hunting expenses that may qualify include postage, mileage and resume preparation.