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Tax planning allows you to reduce your federal, state, and local financial obligations for the upcoming year, but it's challenging to know where to start. Fortunately, by asking your accountant the right questions now, you can set yourself up for savings next tax season. Here are three questions you should always ask your tax consultant well before the season begins.

3 Common Tax Planning Question to Ask Your Accountant

1. What Tax Bracket Will I End Up In Next Year?

While the answer to this question is only an educated guess, it's crucial to the tax planning process. Your tax percentage is based on the income bracket you fall into. By having an estimate as to where you'll fall next year, you can begin making financial choices that will reduce your liability and save you money.

2. Should I Change My Tax Withholding?

tax planningIf you're already paying in more than necessary, your accountant may suggest reducing your tax withholding and putting that money into other investment opportunities. A high-interest savings account or bond would allow you to grow your earnings, or you could contribute them to your retirement fund. On the other hand, if you take on freelance work along with a full-time position, you may want to consider increasing your tax withholding with your regular employer to avoid underpaying.

3. Are There Any Potential Deductions or Credits I Should Consider?

Be vocal about your plans, including home renovations and investment goals, so that your accountant can identify potential savings opportunities. For instance, if you're planning on making some home upgrades, you may qualify for certain tax credits by choosing energy-efficient appliances or solar fixtures. Knowing this information ahead of time will help you make the most cost-efficient decisions.

 

Asking your accountant the right questions is crucial to an effective tax planning process. If you're ready to learn how to reduce your tax liability, turn to Cloyd & Associates PSC in London and Corbin, KY. The accounting firm offers a comprehensive range of financial services to individuals and businesses throughout Laurel County. Whether you need help with tax returns or payroll, request a consultation today by calling (606) 864-8110, and learn more about their offerings online.

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