The Season Is Upon Us: Tax Season
By Ja'Net Adams
April is here so everyone knows that it is time to file your taxes. Some people like tax season because they always get a refund and some people hate tax season because they always owe money. Either way it is something that has to be done by millions of Americans each year. I want to share three areas that taxpayers should be focused on during this season.
Refunds Are Not Always A Good Thing:
Many people get excited about receiving a refund each year. So much that they rush to file their taxes as soon as the option is available. Receiving a large refund may not be working in your favor which might be hard to believe. Oftentimes the reason you are receiving a tax refund is because you have overpaid your state or federal taxes and maybe both. Plainly speaking you have given the government your money during the year and now at tax time they are just giving it back to you. You have lost out on an entire year of that money growing in an investment somewhere. So this upcoming year make it your goal to have the smallest tax refund possible by adjusting the withholdings on your paycheck.
Entrepreneurs Know Your Deductions:
Most entrepreneurs are not rushing to file their taxes like the 9-5 employee. Mainly because they know they will probably owe money to the government. Because of this fact it is important to take actions throughout the year to make sure your tax bill is as low as possible. First, make sure you are claiming all of your eligible business deductions. For example many entrepreneurs forget to add in their business mileage from the car they use for business. This could add up to a few thousands in deductions. Your business also may not be set up correctly. You may be at the point that you should be a S Corp and not a LLC in order to capitalize on some tax advantages. Lastly, tax planning is very important and working with an accountant could help you smile instead of frown at tax time. My accountant Michel Thompson of Lead Book Tax has been a lifesaver!
Start Preparing For Next Year:
It is too late to make any changes for 2021 taxes, but it is still plenty of time to get ready for 2022 taxes. Everyone who is able should be investing whether that is in a 401K, 403B, SEP IRA, Roth IRA, Roth 401K, and so on because investing brings your tax bill down. If you are a business owner and found that you missed out on deductions for 2021 because you were unorganized then now is the time to get organized so that you can have a lower tax bill in 2023. If you don't have a business accountant, start looking for one now so that you can have help with tax planning.
Tax season is inevitable, but the more you prepare the more likely you are to sail right through it!
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