Most people have heard of the Benjamin Franklin quote "In this world nothing can be said to be certain, except death and taxes." Given the rapid rate of medical advancement, there is a real possibility that we will see 1 of those 2 certainties disappear from that list - and I'm not willing to put my money on taxes.
So let's talk about taxes. I'm going to limit the scope to federal income tax as states have differential income and property tax laws. Here are my 2 cents:
- Filing deadline - April 15th of each year.
- If you get a big refund from Uncle Sam at the end of tax season, you screwed up. You essentially loaned the government your hard-earned dollars at 0% interest for a year. For efficient tax planning, your goal should be to end up paying $0 come April.
- The tax code is not a living document, as in there's no deduction/credit out there you qualify for but can only claim through CPA A and not CPA B. The difference lies in which CPA knows to ask you the right questions to claim the deduction/credit you already qualify for.
- Because of the relatively complexity of the US tax code. Many financial professionals have forged successful careers on charging fees to prepare tax returns for the masses. And if you have a complex income/asset situation, you need them. Stop reading and start looking for a reputable CPA in your community.
- But if you have a relatively simple income/asset situation involving no more than a handful of W-2s and 1099s. You may want to check out Free File Alliance where you can choose from a selection of free tax prep software offered by commercial tax prep vendors (TurboTax, H&R Block, TaxAct etc.) provided you meet certain criteria, the main one being Adjusted Gross Income (AGI) less than $60,000.
- If you ever end up getting a big refund or owing a large amount of taxes, it is possible that you may have to adjust your withholding allowances on your W-4 form. Take a look here: IRS Withholding Calculator.