How to Avoid Being Shocked By Your Tax Bill This Year

When it comes time for tax season, many clients are unprepared for the bill when it arrives. Learning that more must be paid can leave many individuals scared, uncertain, and desperate for help. Fortunately, there are ways to minimize the shock that can come when filing, and a wealth advisor is here to better explain what you can do when it comes to tax planning in Dallas.

Make Sure You’re Paying Enough

If you want to avoid penalties when it comes to receiving your tax bill, make sure you’re paying in enough throughout the year. This is done through paycheck withholding or estimated payments. If you pay 90% of your tax obligation for the current year, or if you pay in 100% of last year’s taxes due (if you make more than $150,000 you must pay 110%), you can avoid penalties.

Consider Your Income Sources

Your tax bill shouldn’t just include the money you make through your employer or if you are self-employed. You must also consider other sources of income that you’ll need to add. These can include:

• Investments – These should include realized capital gains when selling securities, dividends and interest, and any pass-through income from mutual funds, which can occur throughout the year but mainly in December.
• Real Estate – This includes recapture on investment properties you sold that have been depreciated on your prior returns. It also includes gain from selling your primary residence. The IRS does exclude $500,000 of gain for a married couple or $250,000 for an individual.
• Self-Employment Taxes – You’ll need to make sure to include any Gig Economy or consulting jobs that report on a 1099MISC. Self-employment taxes are up to 15.3%, you’ll need to include it along with your federal income taxes.
• Earned Income – Any bonuses that your company provides should be included. An important note is that any company may under withhold at 24% as the default unless otherwise noted. As a taxpayer, if you are in the 37% bracket, this will likely mean that not enough was paid in at tax time.
• Equity Comp – A surprise tax bill might be in your future if options are exercised or restricted stock vest and money is not withheld. Also, much like a bonus, the default rate of 24% may not be enough.

Your best course of action is to meet with a financial planner in Dallas who can walk you through the process. In meeting with a professional, they will make sure you are taking the appropriate steps to pay in enough money throughout the year as well as including additional withholdings to avoid the shock so many receive when receiving their tax bill.

About the Author
Taylor Steele, CFP®, CLU®, AIF®, EA* is a Branch Manager and Managing Partner at Cadent Capital. Taylor obtained both his Certified Financial Planner™ certification and Chartered Life Underwriter (CLU®) marks. He is also an Accredited Investment Fiduciary (AIF®) and Enrolled Agent*. As one of the two second-generation owners, he is part of a team devoted to helping clients build better futures by making better decisions. If you’re ready to let us help you better prepare for tax season, call us at (972) 777-4991 or visit our website.

*Taylor’s activities as an Enrolled Agent are independent of Raymond James

Any opinions are those of Taylor Steele and not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making a decision and does not constitute a recommendation. 

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.