While Tax Day isn’t until April, you need to be aware of the financial impact the holidays can have. Many commercial activities that occur during this time of year can have a considerable effect on your overall tax liability. As you gear up for the holiday season, here are five practices that can help make your tax prep much easier in the coming months.

How to Manage Tax Concerns During the Holidays

1. Budget With Tax Payments in Mind

If you haven’t had tax payments withheld from your paycheck, there’s a good chance you’ll owe the IRS in April. Work with a CPA during tax prep to determine how much you’ll owe and make sure your holiday spending doesn’t impact your ability to pay. Budget for gifts and special occasions accordingly and keep your tax funds secure in a savings account.

2. Make Deductible Donations

When you’re in the giving mood, you may be inclined to donate to a charity. If possible, try to make donations to nonprofit organizations that have a 501(c)(3) status with the IRS. Donations made to these organizations can be tax-deductible.

3. Put More Toward Retirement

Every year, you can contribute a specific amount to your 401(k) or IRA account to reduce your annual taxable income. Before New Year’s Day arrives, figure out if you can make additional contributions to your retirement accounts to minimize your tax liability for the current year.

4. Defer Bonuses

When you anticipate a sizable bonus from your employer at the end of the year, find out if the extra income will put you in a different tax bracket. If the amount will bump you up, have the bonus deferred to next year so you won’t have to include it as part of your current annual income.

5. Use FSA Benefits

Flexible Spending Accounts (FSAs) can be used for tax-free medical-related purchases. However, the funds in these plans must be used before the end-of-the-year. If your employer provides you with an FSA, use it before the New Year to take advantage of the tax benefits.

Whether you’re looking to maximize your year-end tax benefits or want to get a headstart on tax prep, Michael C. Davis, CPA, offers the comprehensive accounting support you need. Serving individual and business clients in the Stow, OH, area for more than 35 years, this accountant will help maximize deduction opportunities and review your finances, so you’re ready for upcoming IRS payments. To learn more about these services, visit this Summit County Certified Public Accountant online or call (330) 376-1099.