Whether you already know that your tax situation is unique, or you feel like you lead a pretty simple life, there are plenty of ways people can end up owing way more than they expected come tax season. Staying ahead of the curve and double-checking these common scenarios will help ensure you’re on track to keep your tax responsibility low and reasonable.
15 Events That Trigger Difficult Tax Situations
Some of the items on this list may seem a little obvious, but it’s still a good idea to understand what you’ll be up against! When in doubt, contact a local CPA firm that you can trust. That way, you’ll be able to get professional advice on how to save money.
1. Marital Status
Did you celebrate a marriage last year? A change in your marital status can spark some change in your tax return as well. Make sure to file accordingly.
2. Recent Divorce
Naturally, the same thing happens when a marriage ends. If you were navigating a divorce, that can also lead to some updates for your taxes.
3. Home Sale
Banking that extra money from selling a home can push you into some new tax liabilities. Let your accountant know ahead of time to see how you should handle those funds on your tax return.
4. Investment Donations
Both your investments and stocks can take on new meaning if you ended up donating them to a loved one or another individual last year.
5. High-Value Items
There may be other things you donated last year too, such as a vehicle or another item for a charity auction. These can lead to some pretty nice deductions—when handled correctly.
6. Dependent Status
As your children grow up, or the status of other dependents gets altered, you’ll no longer be able to claim those credits.
7. Retirement Planning
If this is the big year when you’re getting ready to retire, be sure to talk with your CPA or tax professional about those plans.
8. Account Contributions
Maybe you aren’t ready for retirement. But if you’re participating in a 401(k), 403(b), or certain IRAs, you’ll need to report the correct tax-advantages.
9. New Business
Your life changes aren’t always about the personal side of things. Starting a new venture may require you to start filing a business tax return. It all depends on how your company has been set up.
10. Loved Ones
Whenever your family experiences a major shift, your tax obligations might also be affected with a new birth or the death of a loved one.
11. Other Sales
Liquidating assets may lead to other updates for last year’s tax return. Selling stocks and bonds (or mutual funds and business rentals) could have brought on a significant amount of new income.
12. Tax Audit
If you’ve already been through a tax audit once, you’ll likely never want to deal with it again! Getting a good accounting firm on your side can help keep you in the clear.
13. Estate Transfer
Hopefully, everything goes smoothly for managing an estate, because these revisions can have a direct impact on your tax filings. When done right, though, you’ll feel confident that it was tax-efficient.
14. Buying Assets
Maybe your investments were a little more varied last year. Buying or selling high-value items will likely shift your income. (Think: art, real estate, or other significant collectibles.)
15. Social Security
Creating a solid strategy for claiming your Social Security benefits will help give you the funds you need to live comfortably—and reduce your tax responsibility.
Working through these tax situations can be stressful because there are so many ways you can make errors and not realize until it’s too late. Let our team give you the insights you need to file efficiently. At NSO and Company, we always strive to work with your best interests in mind! Please give us a call if you’d like to schedule an initial consultation: (317) 588-3131.