While there are still some strategies you can employ to decrease your tax liability for 2019, it’s a good idea to start thinking about 2020 in advance so you can benefit from year-long savings strategies. Here are just a few steps you can take if you’re interested in reducing your tax liability for the next year and getting better overall tax savings for 2020 in Des Moines, IA.
Adjust withholdings
There are certain times at which it makes sense to adjust your withholdings, even if you’re not doing so primarily with tax savings in mind. Examples include if you have a baby, purchase a house or get married—these are all scenarios that can have an effect on your taxes.
What you’ll need to do is ask your employer for a new W-4 that you can fill out and submit to update your withholdings. Beyond the scenarios mentioned above, you might also opt to do this if you finished the previous tax season with a lot of money still owed to the government. That’s a sign that your withholding was too low. Conversely, if you received an especially large refund but were struggling from month to month or paycheck to paycheck, you might have had your withholding set too high. Either way, you are able to make the adjustment, and the start of the year is the best time to do that.
Improve your financial organization
One of the best ways you can set yourself up for strong long-term financial health is to keep yourself informed and organized. The methods of organization you use are up to you, but you should keep good track of your income and expenses, your travel mileage (particularly for business purposes) and contributions to various accounts and investments. Make sure you keep receipts for all major purchases and for charitable contributions.
Plan to contribute more to your retirement accounts
Whenever possible, contribute the maximum amount of money to your retirement accounts. Not only will this set you up for a better financial future long after you’re done working, but it will also help you maximize the tax benefits associated with contributions to these accounts.
The manner in which you contribute to these accounts depends on the kind of account you have. A 401(k) is funded with pre-tax dollars, so this is money you’ll never actually see enter your bank account. A Roth IRA, however, is funded with post-tax dollars, so you’ll need to plan to make those contributions yourself each month. You can set up automatic transfers from your bank account to your Roth IRA account, if you so choose.
For more information about preparing your taxes for 2020 in Des Moines, IA for an easier time in the coming year, it’s best to consult with a qualified tax preparation service. Reach out to Accounting & Tax Professionals, PLC today. We will be happy to answer any questions you have, and look forward to assisting you in meeting your personal financial goals for 2020 and beyond!