1.) Understand the tax rules and deductions to avoid any fines or penalties.
The whole reason for tax deductions is for business owners to limit their tax liability. Remember, you cannot include expenses from a vacation you take with your family. The IRS has regulations on how much of each expense you can deduct, what type of expense can be deducted, and under what situation. You can get flagged for an audit if you include a deduction that is questionable. Deductions can be tricky, and you should talk to your tax preparer for more information.
2.) Don’t wait past the deadline to file your taxes.
You’re not the only one, if you filed your taxes past the deadline. Millions of taxpayers wait until April to file their taxes every year. But filing late is a mistake and can cost you. You can end up paying more when you file your taxes past the deadline just in interest alone, not including fines and penalties. Also, you are more likely to make errors that can make the process take longer and can lead to more delays.
3.) Not staying current with tax laws.
Tax laws can change each year. When I was in college, my Professor once told the students not to memorize the tax literature because taxes laws are ever changing. Every year tax codes are updated, which can make a big difference on your tax return and many taxpayers fail to take advantage of them. Take some time to stay up to date with the tax laws or ask your accountant or tax preparer to do a thorough tax review so you can take advantage of all the updated tax laws.
4.) Make sure to use the correct filing status.
This can easily be overlooked. Are you filing Single, Head of Household, or Married? It can be very confusing to know which benefits you should use when filing your tax return. There are tax deductions and tax credits that married couples are entitled to if they file jointly and some disadvantages to filing single. Take the timeto know which status to file under. Ask your tax preparer to guide you for the most optimum filing status.
What if you encounter any of these tax problems?
You may find yourself facing one or more of the tax issues in this column (or something different we haven’t included). Feel free to contact us immediately for professional tax help at (727) 449-1835 or email us at CFO@mytotalaccounting.com.