Would a Midyear Review With a Tax Professional Be Beneficial?
Many people only think about taxes when the filing deadline approaches. However, waiting until tax season may leave little time to correct withholding, organize business records or make helpful financial decisions.
A midyear tax review gives you an opportunity to evaluate your current tax situation while there is still time to make adjustments.
What Is a Midyear Tax Review?
During a midyear review, a tax professional examines your income, tax withholding, estimated payments, business activity and significant life changes from the first part of the year.
The purpose is not to prepare your final return early. It is to estimate where you may stand at the end of the year and identify items that may require attention.
Who Can Benefit From a Midyear Review?
A review may be particularly helpful if you:
Started a business or became self-employed
Experienced a significant increase or decrease in income
Changed jobs or had multiple employers
Purchased or sold a home
Purchased or sold a rental property
Received investment or cryptocurrency income
Got married or divorced
Had or adopted a child
Began receiving retirement income
Received a large bonus or commission
Owed an unexpected amount on your last tax return
Are not sure whether enough tax is being withheld
Have fallen behind on bookkeeping or estimated payments
Even when your circumstances have not changed significantly, a midyear checkup can provide reassurance that you are moving in the right direction.
Review Your Withholding Before Year-End
Your federal income-tax withholding is based partly on your earnings and the information provided to your employer on Form W-4. If too little is withheld, you could owe money when filing your return. If your circumstances change, it may be helpful to review your withholding and determine whether an updated Form W-4 is appropriate.
A midyear review provides time to make adjustments over several remaining pay periods instead of trying to correct a shortage at the end of the year.
Check Your Estimated Tax Payments
Taxes generally must be paid as income is earned, either through withholding or estimated payments. Self-employed individuals, independent contractors, partners and S-corporation shareholders may need to make estimated tax payments.
The IRS explains that individuals generally may need estimated payments when they expect to owe at least $1,000 when filing. Underpayment penalties may apply when sufficient tax is not paid on time—even if the taxpayer later receives a refund.
A tax professional can review your income and payments to determine whether your remaining estimates should be adjusted. You can learn more from the IRS estimated-tax guidance.
Evaluate Your Business Records
For business owners, a midyear review is an excellent time to examine:
Income and expenses recorded to date
Missing receipts and financial records
Business mileage documentation
Estimated tax payments
Payroll and contractor reporting
Equipment and major purchases
Changes in business income
Business entity and tax-election questions
Correcting bookkeeping problems during the year is usually easier than trying to reconstruct an entire year of activity during tax season.
Plan for Major Financial Decisions
Are you considering purchasing business equipment, selling an investment, making a retirement contribution or changing your business structure? The tax effects should be considered before completing the transaction whenever possible.
Tax planning does not mean taking unnecessary actions simply to receive a deduction. It means understanding the possible tax consequences and making an informed decision.
Avoid Unwelcome Tax-Season Surprises
A midyear review cannot guarantee a refund or eliminate every unexpected issue. It can, however, provide a clearer estimate of your potential tax liability and reveal concerns while time remains to address them.
Knowing that you may owe additional tax in advance also gives you more time to adjust your budget and prepare.
Schedule a Midyear Review With KR Tax Returns 4 Less
KR Tax Returns 4 Less provides dependable, affordable tax preparation and year-round tax support for individuals, families, self-employed professionals, rental property owners and small businesses. We assist with federal and state tax returns, prior-year and amended returns, business returns, bookkeeping, tax planning, IRS notices and tax-resolution needs.
We take time to explain your tax situation, identify eligible deductions and credits, and help you plan ahead. We serve clients in El Mirage, Surprise, Peoria, Phoenix, throughout Arizona and in all 50 states, with convenient virtual appointments available.
Contact KR Tax Returns 4 Less to schedule your midyear tax review and begin preparing before tax season arrives.
This article provides general information and is not individualized tax, accounting or legal advice. Tax rules and planning recommendations depend on each taxpayer’s circumstances.