Tax season may be long forgotten for some Americans as the tax-filing deadline has come and gone for 2021. Even if you filed on time, a mid-year tax review is a great time to evaluate your current tax situation to help avoid any tax-related surprises next spring.
Now maybe a great time to enact a few changes to improve your tax situation, such as evaluating your qualification for the alternative minimum tax (AMT), increasing your deductions, and avoiding any underpayment penalties.
The first thing to evaluate is whether the correct amount of taxes is being withheld from your paycheck each month. If you are an employee, the IRS withholding calculator can help you determine whether you need to update Form W-4, the Employee’s Withholding Allowance Certificate to avoid having too much or too little Federal income tax withheld from your pay. Use the results from the calculator to help fill out the form.
Taxpayer Appreciation Day and Tax-Free Weekend are both in August. These events remind you to evaluate your tax situation and to shop for things you need while saving money on sales tax. During Tax-Free Weekend, some states cut sales tax on certain items to make back-to-school shopping more affordable. Most large retailers like Walmart, Amazon, & Target will be participating,
A mid-year tax review allows you enough time to plan so that you can meet your annual goals or determine if you need to reassess your current tax withholdings. Meet with your tax professional this summer while they may be more available than during the busy tax season. Your financial professional and tax professional can collaborate to ensure you have achieved your ideal tax situation while saving for retirement or once you retire. Retirement is often when taxes on distributions from pre-tax retirement savings accounts hit, making pre-tax planning essential.
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