It seems as though the months tend to go by faster each year. Before you know it, it's already October, and the holidays are just around the corner. Also just around the corner is the end of the year, which means that you may be running out of time to reduce your taxable income.
However, that does not mean that you are out of time, just that you need to make some decisions soon. You may still be able to save on your taxes, but you may need some guidance before deciding how to proceed in order to protect your interests.
What are your options?
One or more of the following options may help you avoid paying too much in taxes:
- You could use a traditional individual retirement account to reduce your taxable income since contributions are tax deductible in the year you make them. You may not be able to deduct the full amount of your contributions if you have work-related retirement accounts as well.
- You could defer income if possible. For instance, if you expect to receive a bonus or some other additional income at the end of the year, then your employer may agree to wait to give it to you until after the beginning of the New Year.
- You could bunch your business expenditures during the current year. If you know that you will have expenses coming up, and can afford to do it, paying those expenses now could save you at tax time.
- You could also take a capital investment loss, which requires you to actually sell the stock at a loss in order for it to become a "real" loss that you can deduct and offset any capital gains.
As you can see, all of these options come with potential ramifications to your finances. Each option would need careful consideration in order to ensure that taking a certain road does not end up making matters worse for the following year. In addition, you would need to make sure that any step you take does not put you in jeopardy of drawing the attention, and possibly the ire, of the IRS.
Seeking some assistance
You may have some idea of what would work best in your situation, but it may help to gain a clear picture by having another party involved. It is not easy to understand the United States Tax Code, and the IRS may not easily forgive a wrong move on your part. Instead, it may be more beneficial to have your situation reviewed by an Illinois tax attorney with experience in tax matters.