For some taxpayers, tax planning is almost impossible. Not only do the rules seem to change year to year but their income and tax situation also change year to year. However, for the vast majority of taxpayers, this is not the case and tax planning is pretty simple.

If your income and deductions are pretty stable year over year, simply pull up last year’s tax return and look at the amount of tax you paid (not your refund or balance due but the actual tax paid). Are you on track to pay that amount this year? If you are going to be short, you can increase your withholding amounts to help cover the shortfall prior to year end.

For parents, the biggest surprise at tax time may be when a child is no longer eligible for the child tax credit. In 2021 this credit became 3,600 for children under 6 and 3,000 for children under the age of 18. So a parent who received these credits in 2021 has to plan for the loss of the credit (or part of the credit) if their child no longer qualifies.

The other item that can trip up folks is the one time event they failed to tax plan for. So you finally hit the slot machine or lotto for a big payout, you sold a property, you got a big bonus, etc. These things are all great but can trip you up at tax time. That one time event may put you in a higher tax bracket and/or cause you to lose tax credits and deductions which can make the tax burden much higher than expected.

So if your income stream and family situation is pretty stable, tax planning can be fairly easy. However, be aware that any change in your income or family situation may involve actually crunching some numbers to avoid a big surprise come tax time.