Tax season may feel far away, but August is actually one of the best times to take a closer look at your tax situation.
By this point in the year, you have several months of income, withholding, investment activity, and other financial information to work with. At the same time, there are still several months left to make adjustments before December 31.
Waiting until tax season to discover a problem can leave you with fewer options. A mid-year tax checkup can help identify potential issues while there is still time to address them.
Has Your Income Changed?
A lot can happen between January and August. You may have changed jobs, received a raise or bonus, started earning self-employment income, sold investments, received stock compensation, or experienced another change in income.
These changes can affect your overall tax liability, even when taxes are already being withheld from your paycheck.
Reviewing your projected income for the full year can provide a much clearer picture of what your tax return may look like next spring.
Take Another Look at Your Withholding
Federal income taxes generally need to be paid throughout the year, either through paycheck withholding or estimated tax payments.
If too little is being paid during the year, you could face an unexpected balance due at tax time and, in some situations, an underpayment penalty.
August provides an opportunity to review what has already been withheld, estimate your remaining income for the year, and determine whether an adjustment may be appropriate.
Consider Any Major Life Changes
Taxes do not exist in a vacuum. Changes in your personal life can also change your tax situation.
Marriage, divorce, the birth of a child, a move, a home purchase or sale, retirement, and other significant events may affect your filing status, deductions, credits, or overall tax planning.
Rather than waiting until your return is being prepared to discuss these events, reviewing them now may provide additional planning opportunities.
Don’t Forget About Retirement Planning
Retirement contributions can play an important role in both long-term financial planning and current-year taxes.
Depending on your circumstances and the type of account involved, certain retirement contributions may reduce taxable income. Reviewing your contributions before year-end also gives you time to determine whether you are on track with your retirement goals.
A Little Planning Can Go a Long Way
Tax planning is not about predicting every number perfectly. It is about using the information available today to avoid unnecessary surprises tomorrow.
A mid-year projection can help answer some important questions: Are you withholding enough? Should your estimated payments be adjusted? How could a large gain or other income affect your taxes? Are there planning opportunities worth considering before the end of the year?
August gives you something April doesn’t: time to make changes.
If your income or financial situation has changed this year, or you simply want a better idea of where you stand before year-end, now may be a good time for a tax checkup.
Contact Miller CPA to discuss your 2026 tax situation and whether proactive tax planning makes sense for you.