Taxes can affect many areas of your life. Some common situations may make you want to ask, “What requires a tax review?”

What requires a tax review?

A change in your life could mean significant changes in your tax status. Some of these changes include:

• Getting married or divorced
• The birth of a child or an adoption
• A child starting college or an adult going back to school
• Moving to a new home
• A job change
• Starting a new business or side hustle
• Retirement
• A family member passing away

Tax deductions and credits can increase and decrease because of these and other life changes. You’ll want to know as soon as possible if your taxes will increase so you can prepare to pay the increased amount.

Additional considerations with a job change

When starting a new job, you’ll have several decisions to make that will affect your tax situation. You can decrease your taxable income by contributing to qualified retirement and medical savings plans. So, a tax planning session can reveal how much you can contribute to each of these plans below and if you should adjust your paycheck withholdings.

• Retirement savings plans: Learn about the employer’s available retirement savings plans and any other tax-deferred savings options. Remember that some employers will match a certain percentage of contributions that an employee makes to a plan.
• Medical savings accounts: Your employer may offer a Flexible Spending Account or a Health Savings Account to help pay certain medical expenses with pre-tax funds
• Withholding: You’ll need to determine if you want additional federal (along with state and local income taxes if applicable) income taxes withheld from your paycheck beyond what your employer is obligated to withhold.

Even more to think about when starting your own business

A new business [hopefully] means more money but also more tax responsibilities. Most small businesses are flow-through entities. This means any business profits will add to your personal income. Because of this, your personal tax situation could vary dramatically! So, tax planning becomes critical on two fronts: Your new taxable income level and helping you comply with the federal, state, and local business tax rules. Here are some things to consider:

• Separate accounts and credit cards: If you only remember one tip, it’s to keep separate accounts. Without this, it is easy for the IRS to deem expenses as personal and, therefore, not deductible.
• Paying estimated taxes: As a business owner, you are responsible for making tax payments throughout the year to the IRS if your business is profitable.
• Setting up a bookkeeping system: An accurate bookkeeping system is vital to ensuring you don’t pay more taxes than the legal obligation. Consider reconciling your bank accounts weekly (or even daily if possible) so they’re always current.
• Other tax responsibilities: You may be required to submit a sales tax return depending on what types of products you sell or services you provide. It may also be a requirement to submit various payroll tax returns if you have any employees.

Nobody likes a tax surprise, and now is a great time to schedule a tax planning review. Contact RRBB Advisors today!