TAX SEASON IN JULY?
It’s summer in Kansas. The temperatures are high (with no immediate relief in sight). Kids are on summer vacation (with no immediate relief in sight). The quest for the ultimate bikini body is in full swing (with no immediate relief in sight). Unless you’re like me, still working on your extended 2015 tax return (with no immediate relief in sight), taxes don’t even show up on your To-Do List. Leave it to your friendly accountant to remind you it’s never too early to start thinking about your tax liability for 2016.
I don’t know a single tax preparer that enjoys telling a client they owe thousands of dollars. I like giving happy news as often as possible (and, yes, there’s happy news in the tax world). If you have experienced or might experience any major changes in income or deductions for 2016, I recommend checking in with your tax preparer for a quick estimate. This is a list of the most common life events, which usually indicate a significant tax impact: take money out of an IRA or 401k, receive a significant bonus or raise, lose or change jobs, have or adopt a child, get married, get divorced, celebrate your child’s 18th birthday, buy or sell a home, start or close a business.
If you think an estimate is in order, I encourage you to contact your tax preparer and request an estimate. Most preparers will do so for no charge and can turn it around within 24-48 hours. Often times, the information necessary for an estimate is easily and quickly accessible (most recent pay stubs for W-2 employees and financial statements/bank statements for business owners). Your tax preparer should be able to advise whether you should expect a bill or refund and advise you in ways to reduce the amount you owe long before April 15th. I recommend a mid-year estimate for my clients who are W-2 employees and quarterly estimates for clients who own their own businesses.
DISCLAIMER: Estimates are just that. While we, as tax preparers, like to think that we’re infallible, we can’t possibly account for every contingency or for tax laws that may change as late as December. Also, be sure to review any estimates or tax returns prepared for you with a detailed eye and ask for clarification of any figures you don’t understand. An accountant worth their weight in gold will be able to quickly show you exactly how they arrived at the figures.