How To Fill Out a New W-4 and Adjust Withholding
From Tax Guide.
Tax Guide · Arab, Alabama
Year-End Tax Planning: What To Review Before December 31
Year-end tax planning means reviewing your income, deductions and withholding before the year closes. See what to check and when to call your tax office.
The short answer
What is year-end tax planning?
Year-end tax planning is a review of your income, deductions, credits and withholding while there is still time to change some of it before the year closes.
Most tax decisions are locked in once the calendar turns. Tax preparation looks backward at what already happened. Planning looks forward, and the last few months of the year are often the last chance to act on some items. That is why many people ask about tax moves before December 31.
Planning is not about tricks. It is about knowing where you stand, then making informed choices about timing, withholding and contributions. What works depends on your situation, and rules change, so we confirm the current ones before you rely on anything here.
Start with the picture
How do I estimate what I will owe or get back this year?
Take your year-to-date income and withholding, project it through December, and compare it to last year's return.
A paycheck stub shows how much has been withheld so far. If you have a side business, rental income, investment income or a change in your job or household, the withholding may not match your real tax anymore. The IRS provides a withholding estimator, and our office can walk through the numbers with you.
If it looks like you will owe more than you would like, you may be able to adjust before year end. See adjusting your withholding with a new W-4. If you pay estimated quarterly taxes, check that your payments are on track.
- Marriage, divorce, a new child or a change in dependents
- A new job, a second job or a job loss
- Starting a side business or a rental
- Selling a home, stock or other property
- A large one-time bonus or a retirement withdrawal
Timing
What tax moves can I make before the end of the year?
The moves people commonly review involve timing: when income arrives, when expenses are paid and when contributions are made.
None of these is right for everyone, and some can backfire. We look at your whole picture first.
- Retirement contributions: Some contributions must be made by year end, while others can be made after. Annual limits are set by the IRS each year. See retirement savings and your taxes.
- Charitable giving: Gifts generally have to be made by year end and documented, and you usually must itemize to get a tax benefit.
- Itemizing or standard deduction: Bunching deductible expenses into one year can sometimes change which route is better. See standard deduction or itemizing.
- Investments: Capital losses offset gains, and gains and losses are timed by when a sale happens. Personal-use property losses are not deductible.
- Business owners: Purchases, payroll and billing near year end may affect which year they land in.
Small business and self-employed
What year-end tax planning applies if I own a business?
Business owners often have more to review because income, expenses and payments can all shift from one year to the next.
Look at your books first. Clean records let you see profit before the year closes. Then consider estimated payments, equipment or supply purchases, retirement plans for yourself and your employees, and whether you are keeping up on payroll deposits.
Our guide on tax planning for small business owners goes further. If you are self-employed, self-employment tax is part of the picture too.
Gather now
What should I gather before my year-end tax meeting?
Bring a recent pay stub, last year's return, and a list of anything that has changed in your income, family or property this year.
The more current the information, the more useful the meeting. For a business, add a year-to-date profit and loss, payroll totals and a list of large purchases. Our guide on tax documents to bring to your preparer can help with the checklist.
Please never send Social Security numbers or documents through the website. Bring them to the office or call us.
How we can help
How Melton Tax Services can help with year-end planning
Our tax planning and consulting service can walk through your year, explain the choices and help you understand the trade-offs before December.
We cannot promise a particular outcome, and a move that helps one person can cost another. What we can do is look at your numbers, explain what may apply and leave the decision with you.
We serve Arab and the surrounding area. Call 256-586-4635 or contact the office to set up a time.
Answers
Questions about year-end tax planning
When should I start year-end tax planning?
Earlier is better, since some choices have to be made well before the last week of December. Autumn is a common time to check your withholding and estimated payments.
Can I still make changes after December 31?
Some items, such as certain retirement contributions, can be made after year end for the prior year. Many others cannot. The rules depend on the item, and we confirm them.
Will planning lower my taxes?
It may, but not always, and we do not promise a result. Sometimes planning simply shows you what to expect so there are no surprises.
Is year-end planning only for people with a lot of income?
No. Wage earners, retirees, families and small business owners can all benefit from a check-in, especially after a life change.
How is planning different from tax preparation?
Preparation reports what already happened on a return. Planning looks ahead at choices you can still make. Many people use both.
Does Alabama affect my year-end planning?
It can. Alabama has its own return and rules, and we check how they apply. Alabama lets taxpayers deduct federal income tax paid, so a federal change can change the Alabama return.
Read next
Related reading
Retirement Savings and Taxes: IRA, 401(k), Roth
From Tax Guide.
Estimated Quarterly Taxes: Who Pays and How It Works
From Tax Guide.
Tax Planning for Small Business Owners
From Tax Guide.
Tax Planning
A service Melton Tax Services provides.
Melton Tax Services
Questions about your taxes or your business?
Our team in Arab is just a phone call away, and we are glad to talk it through with you.