Much like the Swallows returning to Capistrano each year, nothing is more consistent than taxpayers grumbling about the amount they owe in April each year. This need not be so.
Act Now to Limit Your 2006 Tax Bill
Taxes are a necessary element of life and you really can’t do anything to get away from them. If your goal is to avoid paying taxes completely, you are probably going to be disappointed. A better attitude is to have a goal of limiting your taxes as much as possible. Similar to many things in life, this means you need to plan ahead and take preventive steps.
The best time to address your tax situation is not in April each year. For those who love to file extensions, the best time is really not in October when your last automatic extension is quickly running out. The best time to deal with these issues is before the end of the tax year in which the taxes will be due, to wit, address your 2006 tax bill while it is still 2006!
Ideally, you should site down in January or February each year and plan out how to limit your tax bill for the upcoming year. Much like driving 55 on the freeway, this is a noble goal but is almost never done. Assuming you are like most other people, you get on with your life and the next thing you know, the year is almost up. Practically speaking, you still have time to address your taxes.
As I write this article, it is late October. While visions of Thanksgiving and Christmas may be starting to peak your interest, your 2006 taxes should also be wedging their way into your mind. Simply put, now is the time to take action to limit your tax liability so you can smile when you pay a small amount next April.
If you are having a good year, you should sit down with an accountant and figure out how to move money around to your benefit. If you don’t have an accountant, consider your basic financial situation. Have you fully funded your retirement accounts? Have you made all your quarterly estimated tax payments? Are they accurate given your earnings this year versus last year? Do you have deductible items or needs you can pay for this year to lower your tax bill? The questions are fairly basic, but you should be addressing them now.
Much like going to a dentist to get your teeth cleaned to prevent cavities, limiting your tax bill is all about preventive maintenance. As we roll into November, now is the time to do it.
Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.
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