Individual & Small Business Year End Tax Planning
A troubled economy affects everyone – even the US Treasury. But what should you expect regarding your own tax bill for this year? Apart from changes to the tax laws, how can you expect your income taxes to be affected by the wretched economic circumstances we are facing? How should you plan for your tax situation looking into the year ahead.
First, if you’re in business, make an early evaluation of your income for the year. It’s likely to see a drop next year, so if you can move more expenses into the current year, you may save tremendously on your taxes.
Much more important, it may impact the estimated taxes you have to pay. You may have far less to pay in 2011 than you did in 2010, and that could be true for each installment you have to make as well.
It may also create opportunities to negotiate lower payments, interest rates and other costs for your business as well.
Next, whether you’re in business or just filing an individual or joint return, a reduction in income will lower some of the ratios that are used to calculate deductions and other important tax computations. For example, with a 7.5% floor for deductions of itemized medical expenses, you may be able to take some deductions that would have slipped away in earlier years.
With a worsening economy comes less cash flow. Everyone from the car dealers in your town to the Treasury Department in Washington DC will feel the crunch. Take advantage of what you can to try to lessen the pain from difficult times.
Use these free tax calculators from TurboTax to get a preview of your tax return ahead of time.