For most people the end of the year is usually a time for holiday parties, pumpkin spice flavored everything, and nice cool weather. For any tax accountants this time of year will be about one main thing, tax projections! The fourth quarter is a crucial time of the year for tax planning. Whether it is deciding to purchase more equipment before the end of the year, financial planning for year-end bonuses, or planning for pension contributions, projections are a great tax tool. Just like yearly checkups, yearly projections are always the best way to foresee any possible issues in the future. Your accountant may have suggested a projection for you in the past or maybe you benefit from one each year, but one thing is for sure, you will definitely want to do one this year. A tax projection will be the only way to really answer the question everyone is wondering, which is “how will tax reform affect me?”
How It Works:
The way a tax projection works is by collecting actual information up until a certain period (usually around 9/30) and then projecting the information for the rest of the year. The information is then calculated using tax planning software which helps display the information similar to the format of a tax return. This makes the information easy to follow for the taxpayer while their accountant presents them with this information. A planning meeting is usually the conclusion of the projection which may include going over options for the best tax results. Lastly, our clients are usually given a schedule of action which gives them step by step instructions for items that need to be completed before the end of the year.
The 2018 tax year is the first major tax reform since 1986. From this new tax reform, we have all heard of the big changes such as loss of personal exemptions on individual tax returns and the section 199 provision also known as the 20% Qualified Business Income Deduction, but how will that affect you? Let us help you find out.
Please contact LSL CPAs for more information on projecting your taxes for next year and any other tax reform questions you may have.