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4 Aspects of Your Tax Strategy You Need to Study Carefully
One of the most important responsibilities of any business is tax compliance, which is always easier said than done. Even just the smallest mistake in the meticulous process of calculating and paying your taxes can come with costly fines and possible foreclosure. Whether you plan to do it yourself as a regular working person or hire an accountant that handles small businesses, you need to get it right.
To help you with your taxes, we have assembled this checklist for entrepreneurs and small business owners of all sizes. With no further ado, here it is:
Personal information
On top of your Social Security number, the IRS needs the Social Security numbers of your spouse and all dependents (whether they’re children under 18 or elderly relatives). You will also need last year’s taxes for both the state and the federal government.
Income details
The IRS requires small business owners to prove the income they’re generating as a business.
This you will need the W-2 forms provided by your employer, accomplished 1099 forms, and so on. Remember that there are different 1099 forms for every type of income. If your sole source of income is contractual, for example, you will need a 1099-MISC form. If you make money providing online services or selling on Amazon (and other ecommerce websites), you will need a 1099-K. There are other forms for other sources of income as well, so make sure to complete the right ones.
Deductions
This is probably the most important consideration in paying your taxes. After all, there might be a few things you bought or spent money on last year that can be deducted from your taxes. You might loosen things up for yourself financially if you manage to successfully go through your deductibles.
For example, if you had to pay medical bills for yourself or any of your dependents, you may be entitled to a deduction if it totals more than 7.5% of your adjusted gross income. If you made any charitable contributions throughout the year, you could remove these from your total tax owed if you prove it with receipts.
If you run a registered business of some kind, you might be entitled to quite a number of deductions. In fact, managing your deductions should be an important part of your tax strategy as the owner or manager of a business,
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Credits
Tax credits essentially act like deductions, but you need to qualify for them before you can claim them. Some popular tax credits include:
- The American Opportunity and Lifetime Learning credits, which you earn if you or one of your dependents is getting an education of some sort.
- The Child Tax Credit allows you to claim up to $2000 per child dependent you may have. If you adopted your child, you might be eligible for additional credits.
Final thoughts
Most people file their taxes and don’t give what they owe the IRS a second thought until the next tax season. What they don’t know is that, with a good tax strategy, you could earn thousands and thousands of dollars in savings. While it might be a tedious tax, it might be worth it to consider perusing your finances.
If you feel your accounting skills are lacking, however, why not consider hiring an accounting company? We at FiB rick are fully equipped and committed to ensuring our clients make the best financial choices and employ the finest fiscal strategies.
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