March 7, 2018 – Our tax code is massive, complex, and constantly evolving. Understanding the tax system seems daunting, but is essential for individuals and especially for every business owner. Many decisions we make have tax consequences that can affect our wallet. As you navigate the new 2018 tax reform changes, make this the year you become even more take savvy by learning the ins and outs of the tax code, and create comprehensive strategies to get back the most from the IRS. Here are a few early steps to get you started: Need more expertise, give our office a call today!
File and pay on time: File your tax returns on time or if need more time, request an extension. Pay the taxes due if you can, but file your return even if you can’t pay. Keep business and personal affairs separate. Try to separate your tax life into business and personal spending. This will help you with better bookkeeping and tracking of business expenses that may be eligible for a deduction.
Keep good records: Keep records of purchases, sales, distributions and dividend reinvestments to properly calculate your taxes and deductions. Always choose the best tax treatment for shares if you sell.
Choose the right business entity: For business owners, make sure you are choosing the best business structure for your specific tax purposes. Know the difference between sole proprietorship, general partnership, LLC, C corporation and S corporation and which entity will help you to operate and grow the business or is easier for you to pass to your heirs?
Use retirement funds as a tax break: Make sure you invest in tax-deferred and tax-free accounts. Traditional IRA, Roth IRAs, and 401(k)s, contributions can be made with pre-tax dollars. Some you don’t pay taxes on until you withdraw money, but others like SEP Plans, 403(b), 457(b), and ESOPs have other stipulations. Know the best plan for you.
Prepare for an audit: The IRS has three years to initiate an audit following the date of each filed return. Before an audit, gather all the forms the IRS has requested, get your paperwork ready with copies of your documents and seek to understand what the problem is and determine if you want representation.
Know tax-saving strategies: Everyone is looking for ways to reduce their tax burden. Do you know if you are maximizing your opportunities? From charitable contributions to owning rental property to childcare expenses to business advertising and promotions, there are multiple ways you can cut your tax bill.
Request an extension: Need more time preparing and paying for your taxes? Be sure to quickly get an automatic extension of time to file your tax return by filing Form 4868 electronically. You’ll receive an electronic acknowledgment once you complete the transaction. Keep it with your records.
There’s so much more to be tax savvy this year. Many small-business owners and individuals worry about their taxes only during tax season. However, you will save a fortune in taxes if you pay attention to it throughout the year. Give our office a call to get you off to a more tax savvy start to this new tax season.