Mid-Year Tax Reminder
We know this has been a crazy year; lots of changes, lots of drama, lots of trauma.
That said, one of the things that you can do to improve your situation this year is taking steps to avoid big tax surprises.
Being that it is now mid-year, it's a great time to check in with your tax advisor to see if you're on track for your 2020 taxes.
It's also more important than ever to consider asking your tax professional or financial advisor about opportunities that might be presenting themselves in these very strange, tumultuous times.
Not only do we have tax law changes that have been impacting the amount of taxes that you have to pay, when you pay them, and when you have to take money from your retirement accounts, but we also have a whole set of tax laws that are scheduled to expire in the next several years, or sooner.
Plus, depending on how elections go, planning today around certain issues might be helpful to your situation in other ways.
"Eating Your Own Cooking"
I too have sent off my mid-year numbers to my accountant and I’m awaiting guidance on whether we should adjust our tax planning strategy and tax withholdings.
Last year, Allison and I were within 1% of our tax estimates paid, which is just fine with me. While some don't mind getting a large refund, it's not a good capital allocation decision for our family. I'd prefer to have the money "working" in one way or another. I don't want to have a big surprise bill, either, for obvious reasons. Additionally, if you underpay too much, you may incur penalties.
I was reminded of tax elections again when I met with someone who didn't know what their tax situation was this year because of some changes in their life. This is probably more common than ever with the virus disaster and all the disruptions this year. Unfortunately, as in life, with taxes, there is a point where there is no do-over. So, it is important to keep an eye on things.
Finally, one more reminder:
If you did take money out of your IRA this year for your required minimum distribution and decided that you don't want to take it, since it's no longer required for 2020, you have until the end of August to get that back in and avoid paying the income taxes on the distribution.
Roth conversions are also attractive this year for many people. We have sophisticated planning opportunities in this area and can work with your tax preparer on your specific situation, if you’re interested.
Thanks for taking a look!
Your Team at ISC Financial Advisors