You have just filed your 2015 return and now you're ready to forget all about taxes until next year. But wait! Your 2015 tax return is a great tool to help you plan for 2016. Here's what to look at-
Review your withholding. If you paid additional tax in 2015 or received a large refund, consider adjusting your tax withholding. Underpaying your tax may result in interest and penalties. By overpaying you give the government an interest-free loan. To change your withholding you need to complete Form W-4 and submit it to your employer.
Consider changes in the coming year. Life's big events may affect your taxes. Are you moving for a new job, starting a business, buying a home, going back to school, or having a baby? You may be able to take advantage of certain deductions or tax credits. Look into the requirements for available deductions/credits so you'll have the documentation needed to take advantage of any tax savings.
Age Related in 2016
If you're not already getting benefits, you should contact Social Security about three months before your 65th birthday to sign up for Medicare, even if you don't plan to retire at age 65.
Hospital insurance Part A There is no premium to pay for Part A
Medical insurance Part B If eligible for free Medicare Part A, you may enroll in Part B by paying a monthly premium. Beneficiaries with higher incomes pay higher monthly Part B premiums.
Beginning at age 65, you generally receive a higher standard deduction.
You have reached full retirement age and may receive social security benefits with no reduction in benefits if you continue to earn wages or self-employment income.
Delaying receipt of your social security benefits until age 70 increases your benefit amount by 8% for each year you delay. For example, at age 70, you would receive 32% more than at age 66.
Age 70 ½
After reaching age 70½ you are generally required to start withdrawing a minimum distribution from a 401(k) or traditional IRA (doesn't apply to Roth IRAs).
Reevaluate your retirement. Saving for retirement is one of the most effective ways to reduce your tax bill while keeping money in your own pocket. If you missed maxing out your retirement plan in 2015, look into increasing your 401(k) contribution or contributing to an IRA.
Add up itemized deductions. Will you have enough deductions to itemize in 2016? The standard deduction for 2016 is $6,300 for single, and $12,600 for married filing jointly. Think about changes during 2016 that may increase or decrease the itemized deductions you can claim, such as buying a home, prepaying your real estate taxes, or donating to charity.
Stay informed. Tax laws evolve and staying informed is important. If you need help, we're available year-round. It's never too late – or too early – to start planning for 2016 income tax.