Year-Round Tax Planning

Tax preparation reports income, deductions, and credits for a tax year that has already occurred. Tax planning looks ahead while decisions can still be made. It can involve reviewing expected income, payment needs, retirement savings, and other changes. A completed return is a useful starting point, but a plan should also reflect what is different this year.

Coordinating your financial planner and tax planner can help align investment, retirement, and tax decisions, identify opportunities to reduce your overall tax burden, and plan payments to help avoid a large unexpected balance when you file.

Review your tax plan throughout the year, rather than waiting until filing season. Regular check-ins and reviews after changes in income, family circumstances, or financial goals can help keep the plan current. Starting early gives you more time to adjust payments and consider available strategies. It also lets you evaluate how today’s retirement, investment, and other financial decisions may affect tax liabilities years down the road, alongside your current-year tax picture.

Marriage, divorce, a new child, a job change, self-employment, retirement, or a move can affect your tax picture. Changes in dependents, income sources, and health coverage may also affect credits or payments. Share the details when the change happens, rather than only at filing time, so withholding and other decisions can be reviewed while the year is still underway.

Start with your latest tax return and current income information, such as recent pay statements or a business income summary. Add records of withholding, estimated payments, retirement contributions, investment activity, and expenses that may qualify for deductions or credits. Include expected changes and planned transactions. A projection is more useful when it reflects the whole year, including what has not happened yet.

Compare expected full-year income, deductions, credits, and tax payments rather than looking only at the amount withheld from one paycheck. Multiple jobs, a spouse’s earnings, bonuses, and retirement distributions can change the result. The IRS Tax Withholding Estimator can help with eligible situations. An updated withholding form may be appropriate if your current payments no longer fit your circumstances.

You can access the IRS Tax Withholding Estimator through the link below.

Estimated payments may be needed when withholding does not cover enough of your tax. Common examples include business profits, investment gains, and other income without sufficient withholding. Estimated payments can cover income tax and other taxes, including self-employment tax. Review the payment schedule and amounts as your income changes; withholding adjustments may also be an option in some situations.

No. Federal underpayment rules may allow you to avoid a penalty by meeting an applicable payment target based on current-year or prior-year tax, even when a balance remains due at filing. Payment timing also matters, and special rules can apply. Review both the penalty requirements and your projected final balance so you can plan for any remaining payment.

Even if you qualify to avoid an underpayment penalty, you must still pay any remaining tax balance by the applicable payment deadline.

Yes. Minnesota has its own estimated payment requirements and penalty calculations. Your federal payment or withholding result does not automatically establish that state payments are sufficient. Review expected Minnesota income tax, state withholding, credits, and estimated payments separately. Changes in residency or state-taxable income can also affect the analysis, so tell your preparer if you move or work across state lines.

Pre-tax workplace contributions and eligible deductible traditional IRA contributions may reduce current taxable income. Roth contributions generally do not provide a current deduction, but qualified withdrawals can be tax-free. Eligibility, limits, and deadlines differ by account and plan. Some IRA contributions can be made after year-end for the prior tax year, while workplace payroll contribution deadlines need earlier attention.

If you expect a large tax bill, ask whether opening and funding a traditional IRA with an eligible deductible contribution, or increasing pre-tax 401(k) contributions, could reduce your taxable income. Opening an account alone does not create a deduction. Income limits, contribution limits, and deadlines apply; employee 401(k) deferrals generally must come from pay earned during the tax year.

Before year-end, review your projected income, tax payments, retirement savings, planned charitable gifts, and any investment sales. Some actions, such as employee payroll deferrals and charitable gifts intended for the current year, generally need attention before December 31 for calendar-year taxpayers. Employers, financial institutions, and charities may have earlier processing cutoffs. Some IRA contributions have later deadlines. Confirm the timing and tax effect of each step with your planner before acting.

Selling investments in a taxable account can create capital gains or losses. Holding periods, cost basis, and other gains or losses help determine the result. Realizing losses may offset gains, but deduction limits and wash-sale rules matter. Review a proposed sale before trading, including purchases in other accounts, rather than assuming every loss will immediately reduce your tax bill.

Tax treatment depends on the tax year, the type of gift, the recipient organization, applicable limits, and whether you itemize. A pledge alone generally does not create a deduction; the contribution must meet the applicable payment and timing rules. Keep the required records and acknowledgments. Discuss planned gifts of investments or other property before transferring them, because additional rules can apply.

A tax planner or financial planner can help you compare which assets to donate and which account to use, so your charitable gifts support your goals as tax-efficiently as your circumstances allow.