It’s never easy to prepare for tax season. But, if these five tips are followed, it will be stress-free.
Update Your Books
It is best to dedicate at least one hour per month to updating your books. This will give you up-to-date information about your finances and ensure everything is for tax season. This will save you the stress of last-minute scrambling that can lead to errors or oversights in your paperwork.
Organize your Receipts
You must promptly file receipts from purchases that qualify for tax deductions. Two things are accomplished by prompt filing:
- It makes it easy to update your books accurately.
- If the IRS audits you, the receipt can be presented to them. This will effectively eliminate any questions they may have about the purchase.
Find Out Which Expenses are and Aren’t Deductible.
Discuss with your accountant what the IRS considers a tax deduction. Claim something as a deduction, but the IRS audits and determines it isn’t. You’ll be subject to severe penalties and interest payments. People make the biggest mistake of claiming something as a business expense and then using it for pleasure. Examples of this are a home office, a car, or a house. It is determined if the item was used for business purposes.
You must hire family members who are helping you with a home-based business. You can save tax by hiring family members. Your taxable income will be lower if you pay your family member compensation.
Attention to Carryovers
A carryover is an item that is not fully deductible within one year. This category includes:
- Net Operating Losses
- Home Office Deductions
- Charitable Contributions
- Farm Equipment
Carryovers can help reduce your tax liability and are an important part of tax preparation. You can save money by remembering your carryovers until they are no longer deductible.
Tax and Law Research Inc.’s team of professionals will help simplify your tax preparation and save you thousands over the long term. Contact us today for more tax tips and stress-free advice, or schedule an appointment!