These Are the Best Months To Actually Prepare Your Taxes
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If you’re like many Americans, you don’t begin to even think about your taxes and all that goes into them until somewhere between Jan. 1 and April 15 of the next year, when the tax filing deadline is near or upon you.
While it’s acceptable to do so if your taxes are simple, if they’re not or if you want to make sure you’re getting ahead of any surprises on your tax return, then, according to Alex Freund, a financial advisor and owner of Freund & Smith Advisors, a Northwestern Mutual firm, you really should be preparing your taxes (or at least looking at them) in the following months.
May
Freund pointed out that you see lots of “end of year” tips but by then it’s already too late to make some of the financial moves that can benefit your taxes, such as charitable contributions, contributions to some retirement plans and expenditures out of accounts like health savings accounts.
These kinds of deductions aren’t entirely beneficent on the government’s part, of course, Freund said. The whole reason the government provides a tax deduction to retirement plan contributions is to “incentivize people to make these contributions so they aren’t broke or asset-less as they get near or into retirement, or be fully reliant on Social Security or government assistance.”
But if you don’t make them, you don’t get the tax benefits, either.
So, Freund said, the first month you may want to set about reviewing your tax situation is May. If that seems redundant, because it’s right after you’ve filed your taxes, received a refund or a tax bill, that’s precisely why. By then, you should have a very clear picture of what the prior year’s taxes were like and any changes to make in the coming year.
Taxes should not be like college exams where “we learn not to study until the night of the test and then we cram,” Freund explained.
Every 3 to 6 Months
Ideally, you should schedule a meeting with your accountant or financial advisor every three to six months.
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He said people tend to spend “a lot more time planning our vacations than our futures” but that comes back to bite you in the taxes.
“Planning for the future may not be as much fun, but if you put it in your calendar an hour every quarter or every six months and you stick to it, that’s a good exercise,” he said.
November
Lastly, if you’re going to wait until the end of the year, don’t wait until December, when you’re also likely dealing with holidays and kids out of school for extended stretches, to name a few challenges. Take a look early in November, he said, “When you’re not under such a deadline or duress to say, OK, what are some things I can be doing this year to minimize taxes, save for my goals, etc.”
The more you plan ahead, and the more frequently you check in with your financial picture, the better chance you’ll have of an uneventful tax time.
