One way to do tax planning at the end of the year is to get a preliminary idea of how much your tax liability is, how much you have paid in so far, and figuring out how much of a refund or balance due you might have. You can do this yourself using tax software, or you can ask your tax professional to do this for you.
The goals of running a preliminary tax calculation:
- Figure out how much your federal and state tax liability is
- Figure out how much you have paid in so far (through withholding and estimated payments)
- Figure out how much you have left to pay or if you've overpaid already
- Figure out if there's any data being asked by the software or by your accountant that you need to collect or could organize better.
Once you have a pretty solid calculation of your tax liability, you can take a look at what the tax impact will be if you earn additional income and/or take additional deductions. Some tax programs even have what-if utilities to help you build and compare different scenarios for your income and deductions.
Some resources to help you out:
Tax software reviews and previews:
- Preview of TaxACT and TaxSlayer tax software programs (from About Financial Software)
- Top 5 tax software programs (from About Financial Software)
Links to tax software providers:
- H&R Block At Home
- Spreadsheet-based tax calculator and planner from SimplePlanning.com