April 15 is the date most people think about taxes, but events that affect your tax status occur throughout the year. What’s more, some events affect only federal taxes, while others impact your state and local status too. A Long Island accountant will tell you more about how your taxable status might change in response to the following life events. With advice from a CPA, you can choose the right time to make planned changes and prepare for the surprises life has in store.
Retirement Planning Changes
Investing in a 401(k), IRA, or other tax-deferred retirement program has immediate effects on your tax status. Because you place some of your taxable income into your retirement plan, you lower your tax obligation at the end of the year. Your CPA is able to help you choose the right time to start investing for retirement to save money today while planning for the future.
Whether you sell investments and assets such as stocks to reinvest elsewhere, launch a business, or make your money more agile, these sales change your tax status. Keep more of your wealth invested and working for you until it’s the right time to sell when you have sound financial advice from an experienced CPA.
Depending on when and where you move and your employment status, your tax burden could span multiple states. Many states have tax laws that require any person who physically works in that state for even a single day to pay state taxes. Other states are more lenient and invoke 10- or 14-day rules. If you plan a move to or from New York, accountants who are familiar with the state’s tax laws can help you lighten the impact the move could have on your tax obligations.
Marriages, births, retirement, and other significant lifetime events can transform your tax status immediately. While few couples are likely to reschedule a wedding to accommodate tax laws, planning for an event that is still distant could mean the difference between a local honeymoon and a dream vacation. Discuss any impending life events with your CPA and talk about plans to help you comply with tax requirements for unforeseen events.
Starting or Selling a Business
The professional equivalent to personal life-changing events, starting your own business or selling the company also triggers a cascade of tax status changes. It is particularly important to plan these major changes with the assistance of a qualified accountant.
Major Income Changes
Lottery winnings, a significant raise at work, a windfall from investments – all are positive changes, yet they wreak havoc on your tax plan for the year. A financial advisor who can help you protect your wealth, safeguard you from risk, and comply with tax law is a must if your fortunes take a sudden turn.
The Internal Revenue Service thinks about taxes throughout the year, not only in April, and so does the New York Department of Revenue. The more you can prepare ahead for your tax obligations by working with a Long Island CPA, the more readily you can protect your wealth and avoid penalties.
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