It's August. Time to think about...taxes? Maybe. If you haven't taken a look at your 2016 tax situation, now is as good a time as any. Who should drop everything and pull up their pay stub now?
ANYONE WHO GOT A LARGE REFUND
When that windfall hits your bank account, it's like Christmas in the spring. But you wouldn't give the water company an extra few thousand and then feel like you really hit the jackpot when it gave the money back to you. Why give it to the IRS? Michael Carlin, President of Wealth Management, LLC in Scottsdale said if your refund was huge after filing your 2015 return and your financial situation hasn't changed much, you should consider adjusting your withholding.
"A big refund means you paid too much throughout the course of the year," Carlin said. "You could've used those dollars for a year to pay off credit cards, to reduce the amount on your mortgage or put them into savings for yourself and had them grow for a year. There are too many reasons not to give the government your money for a year."
ANYONE WHO ISN'T MAXIMIZING THEIR EMPLOYER'S RETIREMENT PLAN MATCH
If you had the extra money to lend to the government for a year, you certainly had enough to contribute to your future in your employer's retirement plan. This money comes out of your paycheck before taxes, so the tax break is immediate. Take a look to see if you can put in a little extra and watch the magic of compound interest work for you. Even a percent or two can mean tens of thousands over the long haul.
ANYONE WHO OWED LAST YEAR
Even worse than paying too much, is paying way too little. Finding that balance with your withholding feels like an inexact science but you don't want to write out a big check next April, or possibly pay an underpayment penalty. If you owed Uncle Sam last year, and your money matters have been status quo, you may want to pony up more starting now. You probably need to take fewer allowances. It's easy to change, just consult your human resources department.
ANYONE WHO PLANS TO GIVE TO A CHARITY
Why wait until December? Many charities can use the money in the summertime. Giving to your favorite charity or school is a great way to minimize your tax liability and contribute to a good cause. In Arizona, you don't have to itemize deductions to claim a credit for contributing to a qualifying charitable organization.
"You could donate things like an old car that you're not using anymore. You can get a much much bigger value for it by donating it to charity and get a bigger deduction that could help you," Carlin said. "You can give clothing items. Just keep a good list of what you're giving to charity."
ANYONE WHO MAY NEED HELP TO GET ON TRACK
If you know you need some assistance from an accountant, it's better to ask now when they're not elbows deep in returns. Paying for some professional help today could save you money at filing time.
Click the video above for more midyear tax tips.
