Every year, accounting firms, including us here at Revonary, publish an article that details the year-end tax moves clients might make to minimize their tax liabilities.
These guides are packed with a lot of valuable information. Depending on your situation, you might find it helpful to accelerate or defer income, maximize retirement account contributions, or look at tax-loss harvesting opportunities. However, for the most part, the information in these guides doesn’t change all that much year to year.
Knowing the moves you might make is helpful. But what’s more helpful, in our experience, is knowing whether it’s worth it for you to make these moves, since they’re all so reliant on your personal financial situation.
The time to make year-end tax planning moves is now. By the time we get into the spring and you’re submitting your tax documents to us, for the most part, it’s too late to do anything that will have a material impact on your tax liability.
So, should you pick up the phone and give Revonary a call before the end of the year?
At Revonary, we strive to provide truly excellent levels of client service. A big part of that is being available to all of our clients year-round – not just at tax season.
If your personal financial position has changed in a meaningful way in 2024, it might be worth getting in touch with us. What does that mean? Here are some examples of material changes that indicate it might be worth reaching out to your CPA:
Have you experienced any significant life events this year? Whether you’ve tied the knot or purchased a home, these milestones can have substantial tax implications.
A quick discussion with your tax advisor can help you navigate these changes. Let’s say you got married this year. First of all, congratulations! And second of all, let’s talk about what that means for your taxes. If, for instance, your new spouse makes significantly less than you do, you might owe less taxes this year than in previous years. That means even more reasons to celebrate!
If your income has seen a significant shift—perhaps due to a promotion, bonus, or even a job change—it’s wise to reassess your tax strategy. You might end up paying more taxes, but you’d rather know about it now so you have time to plan for it. And if you are earning substantially more, it’s definitely worth a conversation with your tax advisor to explore whether you can offset that extra income in some way.
This is particularly true if you're a business owner, own real estate, or draw income from sources other than a W-2 job, since it’s more likely you’ll be able to benefit from advanced tax strategies. A meeting with your advisor can help you adjust your withholdings or estimated payments to avoid any surprises come tax season.
While we don’t want to curse it, 2024 has been a pretty good year for investors so far. As of mid-October, the S&P 500 is up over 20%. And if you’ve been lucky enough to own something like NVIDIA stock, it might be worth ten times what you bought it for a couple of years ago.
Review your portfolio before year-end. If you’ve already sold an investment holding for a big gain or loss, let your tax advisor know. If you sold for a gain, you’ll owe capital gains taxes––either short or long-term, depending on how long you held the asset. On the other hand, if you sold for a loss, you might be able to use those losses to reduce your tax liabilities elsewhere.
If you’re a business owner, it’s likely you now have a pretty good idea of how your business is going to close out the year. If there’s a big difference from last year, or if the business’s financial performance has changed significantly since your last conversation with your tax advisor, it’s time for a check-in.
Plus, as a business owner, you enjoy access to all kinds of tax opportunities. Even if your business has performed in line with your financial projections, there may be opportunities to accelerate or defer income, make large purchases that result in a big chunk of depreciation, or explore tax opportunities that can unlock savings.
Taking a proactive approach to discussing taxes with your CPA before year-end isn’t just smart; it’s essential for anyone looking to navigate tax season with confidence.
By engaging in early conversations, you can strategically plan and optimize your tax strategy while there’s still time to make meaningful adjustments. This is your opportunity to uncover deductions, leverage tax credits, and implement strategies that can significantly reduce your tax liability. Whether it’s maximizing retirement contributions or timing your income and expenses just right, waiting until tax season can mean missing out on valuable opportunities that could save you money.
There’s more tangible benefits too. Proactive tax planning helps you sidestep any unwelcome surprises come tax season. By estimating your tax liability in advance, you can prepare for any potential payments, adjust withholdings as needed, and make estimated payments to avoid penalties.
That not only eases financial stress but also empowers you to make informed decisions about your money. Engaging with your CPA early allows for a more strategic approach to tax management, transforming what can often feel like a daunting task into a streamlined process. So, take charge of your financial future—your wallet (and peace of mind) will thank you!
Want to schedule time with Revonary to discuss your tax situation? Reach out to us today!