Death and taxes may be the only two certainties in life, but the latter can be almost as frightening as the former. If you still look back on last year's tax filing season with dread, you are in no hurry to repeat the process.
Even so, getting a jump on next year's filing can make your life easier and lower your stress level substantially. Now that tax filing season is in the rear-view mirror, there are things you can do to more future filings less taxing. Conducting a mid-year checkup on your finances and assessing your current tax situation is one of the best gifts you can give yourself. Here are some tips to help you get started.
Locate Your Tax Records
Whether you store them in a file folder, a shoebox, your hard drive or your cloud account, knowing where your tax returns are will help you sleep easier at night. Now is the time to find your prior-year tax return, including supporting documents, schedules, and PIN codes.
You will need your self-created IRS PIN code if you plan to file electronically next year, and not having it could slow your refund and ramp up your stress level. Be sure you store everything in a safe place, so you will have all the information you need when you need it most.
Educate Yourself on Tax Law Changes
The 70,000 page U.S. tax code is not set in stone; in fact, it is always changing and evolving. Few tax laws are ever settled for good, and Congress is constantly making changes and updating the tax code to help one special interest group or another.
While this means that you as a self-employed individual either need to keep up with the tax code yourself or engage an accounting firm to help you - But in any case - You should be educated on the general concepts that impact your business and personal financial situation.
Some examples of the tax overhaul starting with the 2018 and the Tax Cuts and Jobs Act include QBI, meals & entertainment deduction changes, and changes to the individual and corporate tax rates.
Now is the time to learn about those changes so that you can take advantage of new tax savings, loopholes, and other money-saving opportunities.
The middle of the year is the perfect time to check up on your taxes. As June turns into July and the summer starts to heat up, the tax filing deadline is now in the rearview mirror, but next April 15 will be here before you know it. A mid-year checkup now can make filing your next tax return that much easier.
Learn About Business-Specific Tax Savings Strategies
If you have access to a 401(k) plan, 403(b) program or similar workplace retirement plan, increasing your contributions mid-year could reduce your taxes and ramp up your refund. The year may be half over, but there is still time to increase your contributions and reduce your tax bill for the remaining months.
The middle of the year is also the perfect time to open that IRA or make your annual contribution. If you are eligible for a health savings account, making a mid-year contribution could reduce your tax bill, so you can enjoy a bigger refund when filing season arrives.
There are also a number of strategies including income shifting, depreciation, loopholes, exemptions, and tax credits that you may qualify for that can help you save thousands per year in your taxes.
What do you qualify for?
Get a Free Tax Savings Consultation
Pinewood Consulting’s CPAs will help you assess your tax savings potential through a free consultation. Book yours today with Chad Pavel, CPA.