Fourth Quarter Hero

Fourth Quarter Hero

The fourth quarter in sports is usually when the true champion steps up and takes control of the game. Likewise, dedicating some time and effort into your financial plan during the last three months of the year can truly make bring out the tax-cutting game changer in you.

Abigail Y. Murray, CPA, LLC is your perfect go-to partner during these final moments in the quarter. Our dedicated accounts have the experience and right moves to help you score on this final game winning drive.

With our techniques you won’t have to worry about throwing up a Hail Mary, or sinking in that buzzer beater to get that win. Our strategies will get you ahead of the game and on to financial success.

Fourth Quarter Tax Planning Means Reviewing the Past Year

Fourth quarter tax planning is primarily a review of your inflow and outflows. The first goal is to analyze your federal and state income tax to determine how much you might owe once your return has been filed. Next, you’ll want to determine your withholding so that you can make an educated estimate of how much your payment might be. Last, but not least, you’ll want to use those months prior to April to give yourself an opportunity to save up for that payment.

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Now, it’s important to remember that both federal and state income tax withholdings can be affected by changes in your personal life including: marital status, the sale of your home, or even a new job. By preparing yourself prior to the “big game” in April, you won’t have to deal with the frustration of an unexpected bill that can put a frown on your game face.

Discuss with your tax advisor what your estimated tax payment is so that you can make sure to meet the safe harbor estimates which will stop you from incurring underpayment penalties. Safe harbor means that if your Adjusted Gross Income (AGI) was over $150K, then 110% of your prior tax year needs to be paid quarterly. If your AGI was less than $150K, then only 100%. Bear in mind that wage withholding is accounted for throughout the entire duration of the year, even if the withholding occurs on year-end bonus.

An additional tip to limit those dubious taxes is to analyze income from capital gains. This income can be subject to both the capital gains tax as well as the 3.8% Medicare surtax. To help avoid this, you might want to think about selling off some investments that have lost value since you originally purchased them. Losses in your net capital can reduce ordinary income by up to $3,000.

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Interest and dividend income can also be subjected to the 3.8% Medicare surtax. One means to avoid this situation is by investing in municipal bonds that pay tax-free interest. Also, mutual fund investments in the fourth quarter can bring with it an undesirable taxable dividend before the end of the year (December 31st).

Outflow and CPA Assistance

On the flip side (outflow) think about rolling out your charitable donations early on to help maximize deductions. You can also donate appreciated securities that you have owned for more than one year, which means you get the benefit of a deduction and don’t have to worry about paying tax on the gain.

The truth is, starting good is most effective when you finish well. Having a plan set in motion during the year’s fourth quarter can mean salvation from a lot of headaches. If you’re not too sure exactly where you stand, but would like to get a hold of your situation, then give McAllen CPA, Abigail Y. Murray a call at 956-800-5600 and let’s her make this fourth quarter a strong one for you.