Tuesday, April 17th is the tax deadline for individuals filing in 2018. Taxes are rarely a pleasant experience for those who have more than just a W2 income, but they’re sadly inescapable.
If you’re eyeing some hefty tax bills on the horizon, you may want to consider the following tax tips:
1: Throw some money into your retirement account
If you have a tax advantaged account that you haven’t yet maxed out, now is the time to do so. You can still contribute to the last year until mid-April, which is a great opportunity to make sure you’ve set aside as much money as possible.
2: File even if you can’t pay
As a business owner, it’s possible to end up with tax bills that you just can’t pay right now. Either file with an extension or file requesting a payment plan, but whatever you choose to do, you need to file. Failing to file your tax return is only going to accrue more significant penalties and make it harder for you to negotiate with the IRS.
3: Don’t forget your home office deduction
Your home office deduction can account for a lot of expenses, from the those associated with furnishing it to the utilities that you use while in it. Mortgage interest, utilities, repairs, and depreciation can all be factored in.
4: Consider deferring cash receipts
If you’re on a cash basis, you can consider delaying your cash receipts until the next year. Remember: you only need to make payments on what you actually received when you’re doing your books on cash basis. You’ll still need to pay taxes on the whole amount the next year, but hopefully you won’t have as significant sticker shock.
Alternatively, you can always try to collect on receivables as soon as possible, so you have money for your current tax bill. It all depends on how you do business and how fluid your collections accounts are.
5: Try not to rush through your expenses
There are many expenses that business owners simply miss, such as their meals and entertainment or travel expenses. Make sure to comb through your transactions carefully to identify any areas in which your spending could have been business-related.
6: Remember your vehicle-related costs
Just as a home office is deductible, so is a work-related vehicle. You can deduct expenses related to the time that you spent doing business in a vehicle, ranging from the depreciation on the vehicle to gas and insurance costs.
7: Deduct taxes related to family members
If you have family members on your payroll and they are under 18, you may not have to pay payroll takes on them. Social Security and Medicare taxes are frequently paid even when they don’t have to be.
8: Think about automation
Automating the booking of your expenses, whether it’s through an accounting system or through a simple smartphone app, can make the process of completing your tax return far easier. Think about automating your budgeting and your expense booking to make the next year a breeze.
9: Don’t get blind-sided by investments
If you cashed out investments and made a profit, you’re going to have to pay for the amount of profit you made that year. As many new types of investment, such as cryptocurrency, become popular, many investors are being blind-sided by the amount in taxes that they need to pay. Cashing out an investment and then cashing it back in does not avoid taxes. If you lose money on your trading later on, you can take it as a loss — but only in the year that you experienced that loss. It does not carry back to the prior year.
10: Plan for the next year
Are there any areas you wish you had performed better in this year? Are there mistakes that you made for your return? Now is the time to start planning for 2019, so take some time to create a tax strategy.
Of course, the best way to make sure your taxes are covered is to consult with a CPA. A CPA can not only give you information about your current tax bill, but can also help you plan ahead for the future.