Autumn and Taxes – Wha….? Whyyyyy??

Autumn is not the time we normally think about taxes. Taxes are generally considered an annual drudgery that begins around February 1 and ends on April 15 (or in 2020, July). Yet actually, there are tax-savings tasks to think about year round.

But I get it – no one wants to think about taxes year round. And why is that? Here are a few reasons, as stated by Roger Pine, Founder of Holistiplan, a tax analysis software for financial advisors:

1) It’s an invoice for the biggest expense all year.

2) You are responsible for preparing your own invoice, or hiring someone to do it for you.

3) The invoice forms are a design disaster with unintelligible instructions that take years of schooling beyond a college degree to completely understand.

4) Even when the invoice is done correctly, it’s difficult to see why you got charged what you did.

5) If you don’t do the invoice, or do it wrong, there are serious legal consequences.

6) If you want a smaller invoice next year, you have to know how to decipher the invoice forms for clues. (That must be why it’s called the tax “code.”)

7) It stinks to hear afterward, “If you had only done X, you would have saved Y,” if it’s too late to do X.

How do taxes make most of us feel? Helpless and uninformed. Not the most empowering feelings from a financial standpoint. Taxes are not helping us achieve a sense of financial wellness, or as they say in financial therapy circles, financial “self-efficacy.” 

What can you do this time of year? Autumn is a great time to consider a few year-end moves like: Roth conversions, taking capital losses or capital gains, doubling up on property taxes and charitable contributions, or making IRA and HSA contributions.

Sound like a lot? It could be, but it could save you hundreds or thousands in taxes. If you have a CPA and/or CFP®, all you have to do is gather a few documents and let them do the rest. Gather these:

1) Your September or October brokerage statements (the whole statement, not just screenshots);

2) Your latest paystubs, Social Security statements, or other items showing regular income; and

3) Any large one-time transactions that happened or will happen this year, like a real estate closing statement or estimate.

After reviewing these, you should receive several questions, such as any changes in your deductions. Don’t worry about exact figures – it’s ok to estimate right now. Based upon an autumn estimate of your 2020 income and deductions, your professional can begin to strategize. With an autumn check-in, it leaves you both plenty of time to nail down exact numbers and execute any recommendations before year-end.

Being proactive on taxes can be a vaccine against stress. It can reduce financial complexity in your life. Feelings of greater control can arise once you see how to make your bill much smaller. If you haven’t thought about taxes in autumn before, it might be worth your while to think again.

Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

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