It’s wild to think that there are only four more months in 2019.
As we get older, time sure does fly. And unfortunately, many get stuck in a rut from year to year. Specifically related to taxes — many do not look at, or even think about, their tax situation until the winter or early spring. But if you can take just one piece of advice from today:
Not only can you start planning your taxes in advance, it is by far the wisest thing you can do for an accurate, stress-free April (or at least less stress than usual).
And if planning ahead is the first item of importance, having someone to plan with is a close second. If you are planning your taxes alone, please give me a call so we can meet and discuss everything from strategy to accuracy when addressing your taxes.
Let’s examine a hypothetical situation, and the kind of strategy we could put in place together…
A Powerful Example of Tax Planning For Dallas/Fort Worth Families And Individuals
“Stop setting goals. Goals are pure fantasy unless you have a specific plan to achieve them.” -Stephen Covey
Pretend you were considering taking money out of a pension (401k) to finance a down payment on a house. This kind of strategy happens all the time. However, to complete the transaction without consulting a knowledgeable Dallas/Fort Worth professional beforehand might result in a four- (or five-) figure mistake.
In this specific situation, I would ask you a few simple, necessary questions. And then, depending on the answer, would likely advise you to roll the money ($10,000) into a Traditional IRA. That way, you could withdraw the money at a savings of $1,000. This is because money used for a first home, up to $10,000, is penalty-free when taken from an IRA but not a 401K.
That’s called strategy. When you benefit from that kind of strategy, it’s called tax planning. It’s not only related to housing, 401K or IRA allotment — I want to help you experience all-around financial success moving forward.
While we’re on the topic, here are other “penalty-free” retirement account withdrawal opportunities (Note: these are NOT “tax-free” — only penalty-free):
* Unreimbursed Medical Bills
* Total and/or Permanent Disability
* Health Insurance Premiums After 12 weeks of Unemployment
* Higher Education Costs
* Pending Senate Approval: Qualified Birth And Adoption Expenses
Also note that there are specific caveats to each of these options. We can discuss your best route when we talk about your individual situation. There are a few other obscure situations available, but again — these decisions are best made under consultation.
Although, when working with us, there’s no certified promise of saving money (because every situation is so nuanced and unique to each Dallas/Fort Worth client). But I can guarantee this: If you don’t speak with us in advance, we won’t have the chance to save you all we possibly could on your 2019 taxes.
Don’t wait until winter. Please don’t wait until spring. Let’s get some strategy started … right now.
Timothy A. Phillips, CPA, PC