August 2017: 2017 Tax Planning is Best Completed Before January 1, 2018

By:  Bob Leins, CPA

Published: August 30, 2017

September is an ideal time to project your 2017 income tax liability.

Begin by projecting your 2017 sources of income, deductions and tax withholding:

  • Use the same tax software used to prepare your 2016 Tax Return(s)
  • If your 2016 return(s) were prepared for you – please review them first and then contact your tax professional and ask for a “2017 tax projection”
  • Self-prepared returns should follow the same procedures but use 2017 tax rates (2017 tax rates were determined in late Fall 2016)

Reasonably project your total 2017 income, deductions and exemptions using the same method of tax preparation used for 2016. Be sure to consider any significant life event that occurred in 2016 (example, marriage, divorce, birth or adoption of a child, purchase or sale of a home) as this may affect your 2017 tax obligation.

Compare your projected 2017 numbers to your actual 2016 numbers to be certain all income, deductions and credits have been accounted for. Then:

  • If your 2017 projected taxable income generates a balance due, consider increased withholding or an estimated income tax payment.  Increased withholding can be made anytime between now and December 31, 2017.
  • If your projected income tax generates a small balance due or small refund, no withholding adjustment is necessary.
  • If your 2017 projected income generates a large refund, consider reducing your withholding now.
  • If your 2017 projected balance due is significant and you cannot satisfy the tax by December 31, you may be able to pay the tax without penalty by April 15, 2018. Consult your tax preparation software for “penalty free payments” or your tax professional for further guidance.

Once the adjustment(s), if any, are made, considerate the following:

  • If your projected 2017 tax bracket is high, accelerate tax deductions if possible
  • If your projected 2017 tax bracket is low, accelerate income if possible
  • Increase TSP contributions, if possible, now – no matter what career stage
  • If applicable, consider an educational savings account
  • Consider Roth IRA conversion and tax savings opportunity

Tax savings are directly related to your income tax bracket. Your tax bracket will generally range between:

To determine your tax bracket, look at Line 43, page 2 of your 2016 tax return Form 1040.

NOTE: There has been discussion of substantial 2017 income tax changes.  While the changes could happen, it is very late in the year for this to materialize.

  • Mr. Leins is a Certified Public Accountant. He specializes in taxation at the individual and small business level. Mr. Leins keeps NITP instructors abreast of developments and changes on income tax issues as they pertain to the Federal employee. He is the founder of National Institute of Transition Planning, Inc. He is a key speaker at the retirement planning seminars and also hosts ForYourBenefit weekly radio program.