Tax resolution experts know that tax season extends far beyond April. Minimizing your potential tax debt through a year-round effort can be far more effective than scrambling to find deductions near deadlines.
If you want a lighter tax bill next April 15th, consider the following tips from our experienced tax resolution team at Tax Resolution Group.
Avoid Retirement Plan Withdrawals
Early 401(k) withdrawals can be detrimental to your annual tax bill. Cashing out from a retirement plan too early significantly increases tax rates and warrants hefty penalties, which can run as high as ten percent.
Tax resolution experts avidly warn against making premature withdrawals, as a complete cash out could void nearly half of your total savings. Avoid tax debt by leaving your 401(k) alone until you are eligible for tax-free withdrawal.
Reconsider Freelance Work
Self-employment can have many benefits. Tax deduction, unfortunately, is not one of them. Freelance workers are subject to substantial self-employment tax rates, consisting of both employer and employee Medicare and Social Security tax costs.
If you owe a considerable debt to the IRS, reconsidering freelance work, at least temporarily, may be within your best interest. Avoid tax debt by considering temp work over freelancing.
Cash Out Your RMD
This one is simple: take your money!
Funds cannot remain in your IRA and workplace retirement plans permanently. If withdrawal is not commenced upon your turning 70, large tax penalties will apply.
If you believe that a complete withdrawal is not your best option, simply make a required minimum distribution (RMD) to avoid tax debt and possible penalties. We can help you determine what your best option is.
Maintain Consistent IRA Contributions
If you have consistently made annual IRA contributions, skipping a year can reflect poorly on your tax bill.
Annual IRA contributions yield considerable tax deductions, which will be forfeit upon stoppage.
Year-round planning makes it easier to enforce this tip, so we advise getting a head-start.
Reconsider Paying Off Your Mortgage
Owning your home outright may seem like a good idea, but if you anticipate a costly tax bill in April, remember that mortgage interests can provide substantial deductions to your tax bill if you itemize.
Tax experts agree that if the means to do so present themselves, retaining your mortgage is one of the best options to avoid tax debt and reduce your tax bill.
Tax Resolution Group
Need professional guidance from dedicated experts? Contact Tax Resolution Group to Request a Free Consultation on tax resolution and tax-related fund management. We offer proactive tax services including tax resolution, tax planning, tax preparation and audit support. We offer in person, virtual service or socially distanced service, and we are ready to help you.
Visit us at 2831 Ringling Blvd., Suite D-114 in Sarasota or call at 941-413-2799.