Money Moves to Make Now to Reduce Next Year’s Tax Bill
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Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Here's your Money Briefing for Friday, November 1st. I'm J.R. Whalen for The Wall Street Journal. It might seem a little early to be talking about paying your taxes, but you can take steps now to cut your 2024 tax bill.
If you want to make a charitable contribution and have a deduction for it, you need to make it before December 31st. If you want to get certain kinds of energy credits, you have to make the investment before December 31st. December 31st is a big deadline for all kinds of things.
Wall Street Journal tax reporter Laura Saunders will join us after the break.
Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Some tax planning now could help keep more money in your pocket when it's time to file next year. Wall Street Journal reporter Laura Saunders joins me.
Why should I start tax planning before year-end rather than waiting until filing season?
Laura, it's not even Thanksgiving. Why should people start thinking about their taxes?
By the time people are thinking about their taxes next spring, it's going to be too late to do much at all. Now, you can put money into an IRA or Roth IRA next spring, and putting money into an IRA will cut your taxes. But a lot of the really important things have to be done before year end. The deadline is December 31st. You have to make changes before then.
Oh, so it's not just due diligence and get ahead of the game. There's actually a deadline here.
Yes, there is a deadline. If you want to make a charitable contribution and have a deduction for it, you need to make it before December 31st. If you want to get certain kinds of energy credits, you have to make the investment before December 31st. December 31st is a big deadline for all kinds of things.
I'm going to ask you about the energy credits in a moment. But the Federal Reserve began lowering interest rates recently and is expected to lower them further before the end of the year. How could that factor into how much money people pay next year?
What December 31st deadlines affect deductions, energy credits and retirement moves?
They have lowered them a little, but not that much. And so when interest rates go up, the amount on tax underpayments goes up. A few years ago, that interest rate was only 3%. Now it's 8% on underpayments. And that has cost people billions of dollars already. So people need to pay attention to their withholding if they're employees or to their quarterly estimated tax payments if they're not employees.
And so when they look at those numbers, how can they put them to work for them?
You need to check them or use a calculator or talk to a CPA. There are online calculators from the various tax companies, and you need to make sure that you're paying the 90% by the deadline. And also that if you've had quarterly payments, that you've paid the right amount in the right quarters, because otherwise that can still bring you a penalty.
What if your income was uneven or maybe you had a spike in income during the year?
Oh, that's the most important thing of all. If that's going to cause you to get outside these safe harbors, try to pay more to Uncle Sam to pay what you owe through changing your withholding. Now, employees can do that with their paychecks. And retirees can often do it with withholding on their IRA payouts and things like that.
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