What You Can Do About Your Taxes Mid-Year

NEW YORK (MainStreet) — The tax anxiety begins sometime in February. You know that April is just around the corner. You know that it's not long until you're going to have to pay the piper -- or at least the tax man. What you probably haven't considered is that there are ways for you to start dealing with your taxes starting right now; tax strategies that will significantly reduce your tax burden come April 15. Sound too good to be true? It's not. In fact, a lot of it is things you ought to be doing already, but very few people manage to follow through on.

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Visit Your Tax Professional

Checking in with your tax advisor isn't something you should just do in March or April. In fact, the end of the summer is a great time to drop in and say hello, in no small part because so few people do it. "Mid-year is a great time to see your tax advisor," says Kay Bell, a contributing editor for taxes at Bankrate.com. "By mid-year, you have an idea of how your income is, so you can make reasonable predictions about how the rest of the year will go."

She also advises that you visit your tax advisor whenever there is a major change in your life, such as having a child, getting married or incorporating a business, to see if there are any tax ramifications.

"If you find yourself surprised in March and April, you definitely need to meet with your tax preparer mid-year," says Mike Campbell, a partner at BDO. "There's probably a reason you're getting big bills when you file your taxes."

Campbell believes that the ideal situation is one where you owe the IRS $1 when it comes time to file. Getting as close to that should always be the goal.

Get Organized

"Mid-year is the time you need to start getting your tax documents organized,"says Campbell. This includes organizing any receipts you might have, both for deductible expenses and charitable contributions.

"A lot of people who don't do this, we notice they have a much easier time reporting in April than if they had to go through a bunch of bank records," Campbell says.

Bell points out another reason to get organized now: "If there's anything missing you have time to backtrack and hopefully locate it."

Survey Your Investments

"If you have any investments, now's the time to look at how they're doing," she says. This is where the common taxpayer often runs into the biggest surprises.

"If you're going to get hit with an investment surtax, you need to start looking to see if there are ways that you can minimize that impact," she says.

Bell adds that if you made any profits off of investments that you should spend mid-year looking to see if there are any losses you can take to offset those profits.

"Most people have some degree of flexibility when it comes to their investments," says Campbell, citing capital gains on a sale. "You have some control about whether or not you take certain income in this year or next."

What's more, Bell adds that if you have stocks that are taking a loss that you're waiting to turn around, now might be the time to pull the trigger and take the hit for the purpose of keeping your overall tax burden low.

Talk About Timed Deductions

"A lot of what we do is timing deductions so that they're most advantageous to our clients," says Campbell. For example, you can sometimes kick the can of your property or state taxes down the road a little bit. Campbell suggests that matching these payments to years that you have more income can make sense. "You want to get the most bang for your buck by paying things off in the right calendar year," Campbell says.

Sit Down and Monitor the Situation

Bell believes that people don't take enough of an interest in their taxes. She thinks it's worth looking at your tax situation monthly, rather than annually. "Even if you just sit down for 15 minutes say 'I'm all set,' you need to look at your tax solutions."

--Written by Nicholas Pell for MainStreet

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