Every accountant has gone through it – you walk into a party and the first question people ask you when they find out your profession is: “so you got any tax tips?” Every taxpayer is unique and there are no all-encompassing tips that will work for every taxpayer. However, this list will give you the top tax tips that work for most, if not all, taxpayers.
1) You May be Able to File Your Taxes For Free
Yes I know, as an accountant it is counterintuitive to tell people they can file their taxes for free. But considering that an estimated two-thirds of taxpayers use the standard deduction, it is not cost-effective to hire a tax professional. If you only have a W-2 then odds are you may be able to file your taxes free online. Some states even offer programs to file your taxes for free using well know tax software like H&R Block. For example, New York State offers a program to taxpayers making less than $64,000 a year to file online for free using software like Turbo Tax, H&R Block, Tax Act, and more.
2) Don’t Be Cheap if Your Taxes Are Complicated
If your taxes are simple then you can easily file your taxes online. However, if your taxes are complicated then seeking the help of a CPA is a must. If you have several businesses, invest in real estate, buy and sell stocks regularly, or even itemize your deductions, seeking the help of a CPA could save you headaches down the road. If someone offers to do your business tax return for $100 then odds are you’ll get what you pay for. However, if you’re serious about your finances and are looking for a trusted advisor instead of a tax accountant then a CPA is the way to go.
3) You May be Able to Write-Off ‘Personal’ Expenses
If you are a freelancer then chances are you file a Schedule C on your personal tax return. As a freelancer there are certain expenses that would otherwise be personal expenses but can be deducted as business expenses. For example, if you work at home then you may be able to take the home office deduction. This allows you to deduct a portion of your home/apartment expenses like rent and utilities. Additionally, you can deduct other expenses like a portion of your cellphone, internet, and gas bills.
4) Talk to Your Tax Pro Before the End of the Year
If you sold your home, made any major purchases such as buying a car, started your own business, or even if you just want someone to talk to, calling your CPA before the end of the year is your best bet. Knowing how much you’re going to pay in tax before you have to file your taxes gives you peace of mind and ensures that you won’t be hit with a huge tax bill in April. Your CPA can give you great tax planning tips to reduce your tax liability but if you don’t see them before the end of the year then there’s not much you can do to change your taxes after the fact.
5) Get Organized
The time to get organized is before you send your information to your tax pro. Apps like IQBOXY, Neat Desk and Shoeboxed drastically reduce bookkeeping time and cost while keeping your books and records organized. The best way to maximize your tax deductions is by ensuring all your business expenses are recorded and correctly categorized.
You can be doing these simple tasks everyday that will prepare you for filing your taxes. Do these 5 tips and come April the only thing you will have to worry about is figuring
out what to do with your refund check!