For those who filed for an extension on their 2016 personal income taxes, the due date of October 16 is now less than a month away. It’s no coincidence that local radio has started this month to amp-up its advertising from tax preparation services. [1]
Too many people think that they simply need to knuckle down just long enough to complete their current returns, and then they can blissfully unplug once again until April 15 for 2017. That’s likely a mistake. In fact, it’s often a very costly mistake.
“Your income tax return is a snapshot of where you have been,” advises Dennis Michalak, Enrolled Agent and founder of Capstone Tax & Financial on East Michigan Avenue in Saline. That’s why Form 1040 should be the endpoint of a longer process. [2,3]
A reactionary mindset leaves taxpayers without options they might otherwise use to help reduce their tax liabilities.
Consider the Affordable Care Act, which continues to get a lion’s share of press. What is the real cost of the tax penalty for failure to have coverage? Do you understand your possible qualification for a premium tax credit?
This is only the start of questions you may not even know to ask. Charitable gifts impact almost every tax return; most people think in terms of amount, but fail to consider advantages of timing. [4]
Questions get bigger from there.
People who own rental property need to understand the tax implications of the date on which they sell — if they can “afford” to sell at all. And if they do sell, what is the best from among several options for structuring the deal? Taxes are also impacted by capital gains and losses, making “investment assignments” to offset one against the other, important.
If this is starting to make you feel overwhelmed, you’re not alone.
WebMD hosts a page on its medical advice website where “Experts explain ways to avoid the emotional storms of tax season.” [5]
Notice how the cultural mindset of “tax time” as an stand-alone, once-a-year event is baked into its title.
Dennis Michalak not only recommends against falling prey to this cliché and avoidance, but to take charge by setting up an ongoing process that includes multiple review points throughout the year. Moreover, he recommends an approach that integrates tax planning with goal-oriented investment strategy. [6]
But what if you’re still stuck on the concern that your filing extension from last April is about to expire? Capstone can help with that, too. The important thing is to deal with your tax matters now. That’s how you avoid surprises later.
References
- AM 1290 WLBY (home page).
- “What is an Enrolled Agent?” National Association of Enrolled Agents (NAEA).
- Capstone Tax & Financial (home page).
- “Today Is National Thrift Shop Day” Janet Deaton (August 17, 2017) Saline Journal.
- “How to Cope With Tax-Time Stress: Experts explain ways to avoid the emotional storms of tax season” WebMD.
- “What Is Tax Alpha?” Capstone Tax & Financial.
