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tax planning mistakes to avoid in texas

Avoid These Seven Tax Planning Mistakes In Texas

Financial Planning, financial advisor San Antonio Dec 12th, 2022 by: Darryl Lyons

As Benjamin Franklin said, “By failing to plan, you are preparing to fail”. This is certainly true when it comes to your taxes. By not planning ahead, you could end up with a larger tax bill than necessary. This is where an experienced San Antonio, Texas financial advisor may help. A CERTIFIED FINANCIAL PLANNER(TM) can develop a comprehensive financial plan for you that includes tax planning strategies to minimize your tax burden.

In this blog post, we highlight seven tax planning and income tax mistakes to be aware of to avoid costly tax-related errors. 

Read our Quick Guide on Tax Planning in San Antonio

1. How organized are you?

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Are you one of the many people who dread tax season? Do you start to feel overwhelmed as soon as you think about all of the paperwork that needs to be sorted through? If so, don't worry – you're not alone. But did you know that by taking a few simple steps to organize your records, you can make the process much easier on yourself?

Many people make the mistake of waiting until tax time to start organizing their documents and receipts, but this can lead to missing out on important deductions and credits. 

One way to do this is to set up a filing system for your tax documents. You can use physical folders or an electronic filing system, but the important thing is to have a system that works for you. Another way to stay organized is to keep track of your expenses throughout the year. This can be done through a budgeting app or by tracking your spending manually. 

By keeping track of your expenses, you can easily see which deductions and credits you may be eligible for. By following these tips, you can help ensure that tax time is as hassle-free as possible.

 

2. Do you have the correct withholding rates in place?

One of the most important aspects of tax planning in San Antonio Texas is making sure you are withholding the proper amount from your paycheck. If you withhold too little, you may end up owing money come tax time. On the other hand, if you withhold too much, you may end up giving the government an interest-free loan. 

Here are a few suggestions to make sure you are withholding the correct amount of taxes, based on your specific situation: 

  • First, check your tax withholding status periodically to make sure you are still withholding at the correct level. This is especially important if you are promoted and/or receive a substantial pay raise.  
  • Second, adjust your withholding allowances if your tax situation changes. For example, if you get married or have a child, you will likely need to change your allowances. 
  • Third, meet with your San Antonio financial advisor whenever you have a significant change to your income as that may impact your short and/or long-term financial planning efforts.
  • Finally, remember to account for any additional income sources, such as investment earnings or alimony payments. 

 

Read: MINIMIZE YOUR TAX LIABILITIES WITH SMART INVESTMENT STRATEGIES

don't forget to find a financial advisor in san antonio tx

3. Don’t forget to claim any tax loss carryovers

When you sell an investment for a loss, you can carry that loss forward to offset gains in future years. If you forget to use the tax loss carryover, you'll miss out on the opportunity to reduce your tax liability. While it may not seem like a big deal in the moment, over time, the impact of this mistake can add up. As such, it's important to be mindful of all tax planning opportunities.  

This is where using the services of a San Antonio financial advisor or tax professional can provide you with additional guidance if you are unsure how to proceed. 

 

4. Don’t ignore the Alternative Minimum Tax (AMT) 

One of the most common tax planning mistakes is ignoring the Alternative Minimum Tax (AMT). The AMT was created to ensure that high-income taxpayers who claim numerous tax breaks still pay their "fair share" of taxes. However, the AMT can also trap unsuspecting taxpayers who are unaware of its existence. 

If you neglect to account for the AMT, you could end up owing thousands of dollars in additional taxes. Similarly, failing to properly report income from investments or self-employment can also lead to hefty tax bills. 

With careful tax planning provided by an experienced team of wealth advisors, you can avoid these costly mistakes and minimize your tax liability.

Are you looking for an experienced San Antonio Texas financial advisor who can help you with tax planning?  Connect with the PAX Financial Group!


5. Be sure to account for mutual fund dividend reinvestments

Dividend reinvestment is the process of using a company's dividend payments to purchase additional shares of stock. This can be a great way to boost your portfolio's growth, but it also has tax implications that you need to be aware of. 

If you don't account for dividend reinvestments when tax-planning, you could end up paying more in taxes than you need to. That's because dividends are taxed as ordinary income, which has a higher tax rate than capital gains. You only pay a capital gains tax when you sell the investment.  

By taking proper tax planning into account, you can ensure that you won't pay any more taxes than you owe.


6. Are you maximizing your 401k contributions?

Many people choose not to maximize their 401k contributions because they don't understand the tax implications. One of the best ways to reduce your tax liability is to contribute to a 401k. 401k contribution limits are set by the IRS, and the money you contribute is deducted from your taxable income. This can help to lower your tax bill while growing your retirement savings. If you're looking for ways to reduce your tax liability, contributing to a 401k is a great option.

 

7. Are you leveraging charitable donations?

Charitable donations are a great way to lower your tax bill, but only if they are made strategically. For example, if you donate stock that has gone up in value, you can avoid paying capital gains tax on the sale. You can also donate appreciated assets, such as real estate or art, and take a deduction for the full market value of the asset. 

It's important to keep good records of all your charitable donations so that you can maximize your tax benefits. Consider consulting with a registered investment advisor who provides tax planning, along with retirement planning and wealth management services in San Antonio. 

 

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This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

 

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.

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