IRS Post-Holiday Blues

Good Afternoon,

Finally, the Holiday Season is upon us! People have been shopping (hence strong Black Friday and Cyber Monday numbers), but the IRS can be a post-holiday Grinch. This week, the NY Times published an article about making last-second tax preparations before the end of the year. It has been some time since I've talked about taxes, but this article is worth reading. This article was very informative and had a few key points worth mentioning which are below:

  1. Tax Payers are still able to change their withholding rate 
  2. The number of refunds given was only down .3%, but for those making between 100k-250k the amount of the refund dropped about 11% (the average refund amount for all taxpayers declined 1.3%)
  3. It is advantageous to bunch itemized deductions
  4. There is an incentive to maximize contributions to tax deduction accounts (401Ks, IRAs, 529 College Savings Plan)

If there is one thing that most of us taxpayers haven't considered is that we now need to have a strategy for how we file taxes. It might be best to take the standard deduction one year then the next year do an itemized deduction. This requires us to plan our future spending better than we have in the past, but it can be advantageous to our pockets. 

Based on the key points I mentioned above, while you are arranging a gift list for your loved ones, it might be a great time to also put together a tax strategy with either your tax preparer and/or your significant other. A lack of tax planning can have the IRS providing you with some post-holiday blues.

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