As the end of the year approaches, it’s easy to get caught up in the holiday hustle and bustle, leaving financial matters like tax planning on the back burner. But at Favored Financial Planning, we know that taking a proactive approach to your taxes can make a significant difference. Instead of waiting until April to discover an unexpected refund—or worse, a bill—it’s time to take control now and ensure your finances are in order before year-end. Let’s dive into why tax planning is so important and how we can help you avoid any surprises on Tax Day.
Understanding Why You Get a Refund or Owe Taxes
Many people are left wondering why they receive a tax refund or end up owing money when they file their returns. The answer typically lies in your withholding amounts, deductions, credits, and income changes throughout the year. If you’re not keeping an eye on these factors, it’s easy to be caught off guard come tax season.
At Favored Financial Planning, we take a deep dive into your financial picture to help you understand your unique tax situation. Here are some of the key reasons why you might get a refund or owe taxes:
- Changes in income: If you’ve received a raise, changed jobs, or earned income from new sources like investments or side gigs, it can affect how much tax you owe. Without adjusting your withholdings, you could owe more than expected.
- Deductions and credits: Whether you’ve had a child, bought a home, or made charitable contributions, these life changes can affect your tax return. Maximizing these deductions and credits can reduce your tax liability, or if missed, may lead to paying more than necessary.
- Retirement contributions: Contributions to your retirement accounts like a 401(k) or IRA can help reduce your taxable income. If you’re not taking full advantage of these opportunities, you could miss out on tax savings.
- Withholding adjustments: Sometimes, your employer doesn’t withhold the correct amount of taxes. If your withholding isn’t aligned with your income and filing status, you might get a large refund or owe a significant amount when filing.
By reviewing your financial situation now, we can help you understand exactly what to expect and make any necessary adjustments before the year is over.
Why You Shouldn’t Wait Until April
Many people wait until the new year to start thinking about taxes, but that could be a mistake. Tax planning is most effective when done before the calendar year closes. Here’s why acting now matters:
- Maximize deductions and credits: There are several tax-saving strategies that can only be implemented during the current tax year, such as contributing to retirement accounts, making charitable donations, or paying certain medical expenses. After December 31st, your options for lowering your tax bill diminish.
- Avoid surprises: No one wants to receive an unexpected tax bill or miss out on a larger-than-expected refund. By doing a year-end tax review, you can ensure there are no surprises when Tax Day arrives. This is especially important if your financial situation has changed, such as getting married, having children, or starting a new business.
- Make necessary adjustments: If you’re under- or over-withholding on your taxes, you can adjust your W-4 form with your employer before the year is over to prevent a large tax bill or refund. Remember, getting a large refund isn’t always a good thing—it’s essentially an interest-free loan to the government. By adjusting your withholding, you can keep more of your money throughout the year.
How Favored Financial Planning Can Help You
At Favored Financial Planning, we specialize in helping individuals and families optimize their financial strategies, including taxes. Our tax planning services go beyond the basics of filing your tax return—we take a comprehensive approach to ensure your financial plan is as tax-efficient as possible.
Here’s how we can help you before year-end:
- Comprehensive tax review: We’ll analyze your current tax situation, including your income, withholdings, deductions, and credits. From there, we’ll identify opportunities to minimize your tax liability and avoid any unpleasant surprises.
- Tax-saving strategies: We’ll recommend strategies tailored to your financial goals, such as maximizing retirement contributions, taking advantage of available credits, or harvesting capital losses.
- Withholding adjustments: If needed, we’ll help you adjust your withholding to ensure you’re not over- or underpaying throughout the year.
- Education and support: We believe in empowering our clients with the knowledge they need to make informed financial decisions. We’ll walk you through your tax return so you understand exactly why you’re getting a refund or owe taxes, and how to make changes moving forward.
Don’t Wait – Let’s Get Started!
At Favored Financial Planning, we believe that proactive tax planning is key to a successful financial future. Now is the perfect time to take a closer look at your taxes and make any adjustments before year-end. Whether you’re looking to avoid a surprise tax bill or simply maximize your savings, we’re here to guide you every step of the way.
Don’t wait until Tax Day to find out where you stand—let’s work together now to ensure a smooth tax season. Contact us today to schedule a tax planning review and take control of your financial future.
