In today's tax world with its complicated rules and reporting requirements, it never hurts to plan ahead. The preparation process can take time, however. More importantly, such preparation requires great care as mistakes can result in harsh tax penalties and asset seizures.
As another year comes to a close, it is important to see what steps you can take as a Michigan taxpayer to avoid consequences. The more thorough and accurate you are in your reporting, the less likely you are going to draw unwanted attention upon yourself by tax authorities.
Some steps you can take regarding advanced tax planning include:
- Review major changes in your life during the prior year that could lead to various tax implications. Such changes could include marriage, divorce, having a child, or no longer being able to declare a spouse or a child as a dependent. The purchase of a new home obviously can impact the deductions you take as well.
- Organize your tax-related documentation including W-2 and 1099 forms documenting your income and receipts that verify deductible expenses. Putting such documents together in a folder for easy access can make life much easier for you in the event an audit arises.
- Pay particular attention to IRA contributions. Though the deadline for most taxable deductions will end with the coming of the New Year, you can continue making contributions to your IRA that may impact your 2016 taxes right up to the April filing date.
These are just some of the benefits of tax planning. A seasoned tax attorney could likely have a number of ideas as well to reduce the number of headaches that can occur because of lack of preparation.