Business
13 Tips for Getting on Top of Your Taxes
It’s tax season! Whether you have only a personal return to worry about or that plus a business return, there are a few helpful tips to keep in mind while getting your tax forms completed.
It’s tax season! Whether you have only a personal return to worry about or that plus a business return, there are a few helpful tips to keep in mind while getting your tax forms completed.
Here are some of those pointers to keep in mind.
Table of Contents
1. Decide whether you need help.
For many people, completing one’s taxes may seem pretty straightforward. For others, it may look like a daunting process. If an individual has an incorporated business, such as an S corporation or partnership, and multiple qualified deductions on their return, then a professional’s help is probably best.
2. Don’t forget to fund your retirement fund.
There are multiple financial vehicles available to save for retirement, whether it is a Traditional IRA, SEP-IRA, or Keogh Plan, to name a few. In most instances, money contributed towards retirement is a legitimate way to reduce one’s taxable income on paper.
3. Stay organized.
If you have deductions to keep track of, or if your income is cash, you should stay on top of it. This is possible to do manually, and if your situation is more complicated, you can sign up for programs to help you automate it.
4. Keep in mind the tax deadline.
Tax season typically begins on January 15th, with the IRS beginning to accept personal returns through April 15th. Business returns, particularly with S corporation and partnership returns, are due on March 15th. It’s important to file on time to avoid late penalties and fees.
5. Decide whether you want to itemize or take the standard deduction.
An individual is eligible to take a $12,400 standard deduction off their taxes. However, itemizing expenses, which entail taking deductions for qualified personal expenses, such as mortgage interest and charitable deductions, may yield greater tax savings.
6. Consider the home office deduction.
Those who have a dedicated office area in their home for work might be worth considering the operating expense of that area for a tax deduction.
7. Remember to include any dependents on your tax return.
If one has any children or adult dependents, it’s important to remember to note this on one’s tax return. Doing so allows for certain tax credits to reduce one’s taxable income.
8. Consider setting up a taxpayer account and filing online.
If one uses self-help tax software, such as TurboTax or TaxAct, tax filing, payment, or refunds are automated online. If one is employing a professional to complete their return, then electronic filing may be set up by that professional on one’s behalf. Otherwise, one can create an account online directly with the IRS for quicker and more efficient filing.
9. Make sure you are filing all the appropriate forms.
If one uses self-help software to file a personal return, all the necessary documents should be included as part of the paid package. If one is filing directly with the IRS, with no middle party to help facilitate the process, it’s important to be careful to point the proper forms and double-check that all necessary documents are filed. For business returns and more complicated personal returns, it’s best to consult a professional to ensure that all the appropriate paperwork is filed.
10. Consider hiring your children (and paying them).
If one has a business, no matter how formal or informal it is, hiring a family is advantageous for both you and them. Any salaries paid to the family are tax-deductible. Retirement contributions and health benefits are also tax-deductible expenses for the family that is the employer.
11. Keep healthy.
If you are self-employed, the entirety of your health insurance is tax-deductible, as is even your dental insurance. If you are employed and purchase health insurance with a high deductible, opening a health savings account or a flexible savings account and using it can help you offset some of the monies spent on taxes.
12. Buy supplies for work.
If you are employed and purchase supplies relevant to your work, this may be deductible. If you are self-employed and make large purchases pertinent to your work, the cost may be deductible in full.
13. Make timely payments, if needs be.
Though many individuals may expect a tax refund from the IRS, some may wish to pay additional monies with their tax filing. Whether it be via an unincorporated status as a 1099 contractor, an LLC, or a corporation, those who are self–employed are expected to make quarterly payments throughout the year by the IRS. Suppose you are wondering when LLC Taxes are due in 2020. In that case, the IRS enables one to register on their website for quarterly estimated tax payments: January 15th, April 15th, June 17th, and September 16th.
Conclusion
Taxes are an unpleasant obligation for all of us who live in the United States. Even those of us who live outside of the United States and are citizens of the United States, staying abreast of tax filing with the IRS is an indisputable legal obligation. To make this obligation run smoother, there are a few pointers to consider. Though it’s not exhaustive, the above list is pretty thorough and a good start.
Business
Tax Filing Advice: Self-employment Tax (IRS Form 1040)
In this post, we’ll show you how to fill out Form 1040 and offer some tips on how to minimize your tax obligations. Tax Filing Advice – Self-employment Tax – IRS Form 1040.
Filing your taxes can be challenging, especially if you are a freelancer. As a freelancer, you are required to pay self-employment tax, maintain track of your revenues and expenses, and submit projected tax payments throughout the year. You can complete an IRS Form 1040 with a little help and a quarterly tax calculator, despite the fact that it could appear challenging. In this post, we’ll show you how to fill out Form 1040 and offer some tips on how to minimize your tax obligations.
Table of Contents
1. Assemble Your Papers
Before you start filling out your Form 1040, you must gather all the necessary information and paperwork. Your W-2s, 1099s for any freelance work you did, receipts for any anticipated tax deductions, and any other financial records you might have are included in this. You must also include your Social Security number and the Social Security numbers of any dependents you wish to claim.
2. Verify Your Filing’s Status
Your file status affects your tax rate and the size of your standard deduction. Determine which filing status is appropriate for you based on your marital status, the number of dependents you have, and other factors.
3. Ascertain your income
Your total income for the tax year is what is referred to as your gross income. This includes all forms of income, including wages, salaries, tips, and revenue from side jobs. Add up your income for the tax year and gather all of your supporting papers. List all of your sources of income from contract work.
4. Remove Your Modifications
By deducting adjustments from your gross income, you can reduce your taxable income. They also pay your health insurance premiums, student loan interest, and IRA contributions if you work for yourself.
5. Choose Your Tax Savings
By taking some expenses out of your taxable income, you can reduce it. The two distinct types of tax deductions are standard and itemized. The standard deduction is an agreed-upon sum of money that is available to all tax filers. As itemized deductions, you are allowed to deduct some costs like state and local taxes, charity giving, and mortgage interest. It is better to select the tax deduction that would result in the greatest financial savings.
6. In Step Six, determine your taxable income.
After subtracting either your standard deduction or your itemized deduction from your AGI, your taxable income will be determined. According to federal law, this amount is your taxable income.
7. Choose Your Tax Credits
They are made up of education, earned income, and child tax credits. To reduce your tax obligation, find out which tax credits you are eligible for.
8. Find Out How Much Tax You Owe
Your overall tax liabilities, less any payments or credits, are referred to as your tax burden.
9. Verify Your Upcoming Tax Payments
If you are self-employed, you must make estimated tax payments throughout the year. Check your expected tax payments throughout the year to ensure you made the required amount to avoid underpayment penalties.
10. Finishing Schedule C
Schedule C, the relevant form, is used to report your self-employment earnings and expenses. To calculate your self-employment tax, which is based on your net self-employment income, use Schedule C. In addition to this, you will also owe regular income tax.
11. Add Up Your Credits and Payments
Add all of your year-end payments, such as estimated tax payments and any taxes you have withheld from your pay. If you qualify, take a deduction for any tax credits. Here, your overall payments and credits will be displayed.
12. Figure out whether you owe a refund or are due one.
You should evaluate your entire tax burden in relation to your total payments and credits. If your tax due is greater than the sum of your payments and credits, you will be obliged to pay extra tax.
13. Upload Your Return
When you’ve finished filling out Form 1040 and any necessary attachments, sign and date your return, and then send it to the relevant IRS address. Make sure to keep a copy of your return and any supporting documents for your keeping.
14. Tips on How to Cut Your Taxes as Much as Possible
Now that you know how, let’s speak about how to complete Form 1040 so that you may maximize your tax savings as a freelancer.
Using tax deductions is a smart move.
As a freelancer, you might be eligible to write off a range of expenses from your taxes, such as business travel, office supplies, and office equipment. Keep note of all your expenses throughout the year in order to maximize any relevant deductions.
Submit projected tax payments
As was previously stated, self-employed individuals are obligated to make projected tax payments throughout the year. This allows you to keep track of your tax obligations and prevent underpayment fines.
You May Want To Add
The ability to deduct more business expenses and a lower tax rate on self-employment income are just two of the additional tax benefits that incorporating your freelancing business may offer. Speak with a tax professional if you’re unsure if incorporation is the right option for you.
Employ tax-favored retirement accounts.
You may be able to reduce your taxable income and increase your tax savings by contributing to tax-advantaged retirement plans like an IRA or Solo 401(k). Use these accounts if you meet the requirements.
Conclusion
Although filling out a Form 1040 can be intimidating, with a little planning and assistance, it is actually rather easy. Even though you may face certain challenges as a freelancer when attempting to maximize your tax savings, there are a number of strategies you may employ to help minimize your tax burden. By taking advantage of tax deductions, paying expected taxes, considering incorporation, and using tax-advantaged retirement plans, you may keep more of your hard-earned money in your pocket.
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