10 Tax Secrets to prepare you for Tax Season

Tax season will be here before you know it, these tax secrets will help you prepare if we prepare our taxes before they’re due we alleviate unnecessary stress. These tax secrets may seem obvious, but it’s how we use the knowledge to help us prepare that gives knowledge value, obvious is only worth it if we follow it. 

I’m an advocate against stress. It’s not allowed into my life unless I create it. There are two types of stress, stress that occurs to us and stress we create, controlled stress and chaos. The former is when we’re unprepared to meet the difficulties or challenges we face in life, not leaving on time, forgetting our supplies, all are unnecessary stress.

The latter is the right type of stress, consider working out in the gym to fall in this category; the controlled pressure allows you to grow. Controlled pressure will enable us to deal with uncontrolled stress at levels we haven’t yet encountered.

Taxes are stressful, but it’s likely because we are unprepared to pay or file, they can be aggravating when we’re unaware of what we owe and what we overpaid, the confusion is unsettling.

But the confusion makes sense. If we didn’t prepare our taxes, plan for them and take action, our expectations are what is confusing us. By planning and preparing your taxes, you’ll know how much you owe and what is paid, ten secrets can help you get started.

If you’re still unsure, consider scheduling a call with our tax professional.

“You can’t tax business. Business doesn’t

pay taxes. It collects taxes.” Ronald Reagan

Why would anyone pay more in taxes than they were supposed to? Because they don’t know they’re paying more, think about it, we naturally avoid things that are discomforting or bad for us. We know what we know, but we don’t know what we don’t know. What you don’t know is what you pay for.

Know your filing dates

The best way to prepare for taxes is to know your filing dates. When we set deadlines, we see the preparation and the work that needs to be done; without timelines, we create chaos. The filing deadline for individuals is April 15, you can apply for an extension before the deadline to October 15, click here for all other filing dates.

If my goal was to lose ten pounds, but I never set a deadline, how long would it take me to reach my goal? It could take weeks, it could take years, but because I’ve given myself the ability to procrastinate, I will. If I set a goal for thirty days, my whole attitude changes, I intensely focus on the daily tasks to reach my goal of losing ten pounds, and I’ll reach it.

If my goal was thirty days, but I did nothing during that time to meet my goal, the last day I decide to spend a good eight hours at the gym, I’ll gain almost nothing from my efforts. Consistency adds up, not what we do last minute or once in a while.

Withholding

Do you know what withholding is when it comes to your W-2? Withholding is how much in taxes you tell your employer to take from each paycheck to pay taxes if you get a big refund, it means you overpaid in taxes and are receiving less income throughout the year.

If you owe a lot in taxes, it’s your withholding. It is paying as minimal as possible in taxes. Ideally, you want to be at zero. When tax season comes around, you want to owe nothing and receive nothing. This means that you accurately estimated the amount of taxes you need to pay and paid precisely that.

You can change your withholding throughout the year. If you’re unaware of how to do this, you can contact your employer. I know it’s nice to get a “bonus” check at the beginning of the year, but it’s already your money. It’s technically the difference in what you’re underpaid.

Even if it’s a small amount, it matters, every little bit makes a difference. More than 70% of people in the United States live paycheck to paycheck, based on a study conducted by career builder, the extra amount we overpay in taxes could be invested to grow for us.

Invest your return before you spend it

If you’re receiving a tax refund this year, invest your return before you spend it, it doesn’t take a lot to know how to invest. The problem with receiving a significant return is we spend it before the money is deposited into our bank accounts.

Instead of taking yourself on vacation, investing a more significant principle gives us a higher chance of a return, the gain we receive can be used on vacation. If you plan to put your money in a place where it will grow, you will. If you don’t prepare, you’ll spend it.

When we receive a raise, we often don’t think about where the money is going to be spent. Our focus is that we’ve gained additional income. The first few times we receive this money, it’s likely to be 100% gone. The payment was extra and anything extra we spend.

For those that risk-averse, a high yield savings account will still give your money some growth.

Learn new tax laws

Tax reform occurs when new laws are voted into place, it’s important to learn new tax laws, if you find them too complicated, reach out to us for assistance. Tax reform can do a few things to impact your taxes; it will change the tax planning you implemented in previous years, removing any benefits you received. It will implement new tax laws that you can take advantage of for your business.

It’s important to know that tax laws will continue to change and you receive the biggest benefit from staying abreast of these changes. Being unaware is costly and you’re likely already overpaying in taxes.

You may have to abide by local and state tax laws in order to stay compliant for your operations. These laws change so often and can become complex enough that tax managers named number one job.

Reduce Taxable Income

Businesses have more deduction opportunities than individuals which means they can reduce more taxable income, reducing taxable income means a lower tax bill overall.

Consider giving back first, if your company had a successful year, you can reward your employees in the following ways: End of the year bonuses and a holiday party. The holiday party needs to meet certain IRS guidelines but can lower your taxable income.

If your business needs new equipment, now is the time to do some shopping, business supplies that are immediately necessary and will improve productivity should be your priority. If it’s something that won’t immediately give you a return, consider holding off, assets like investments should be made intelligently.

Lastly, you can donate cash or it’s equivalent such as equipment or property to charitable organizations for a writeoff. If you feel that you’re missing out on tax deductions, speak with a tax professional today.

Estimate taxes

If you regularly owe on your taxes, you can estimate taxes and save money throughout the year. When it comes time to pay your taxes, you won’t have to worry about doing anything extravagant for additional funds, like selling equipment or taking out a loan. Not paying your taxes on time creates additional fees and interest that add up.

If you have the money set aside, you’re prepared to meet debt head-on instead of being blindsided by it. It’s something we can prepare for every year.

Understanding how you pay taxes is a big help. For instance, as a single filer, if you make $40,000 a year, you won’t just pay 22%. From $0 to $9,525 you’ll pay 10% taxes on this, everything past $9,525 up to $38,700 you’ll pay 12%, and from $38,700 to $40,000 you pay 22%.

If you need help estimating taxes, please don’t hesitate to call us.

Organize your files

Collecting all the relevant information is easier if you organize your files, creating an orderly system is imperative to your business. Still, it doesn’t have to be in a traditional way. Nowadays, everything is going digital. When you need to keep receipts for your business, scan them, and now you have two copies.

I learned the importance of creating a backup system in the Marine Corps, when our servers went down, we pulled out the binders and publications. Nothing was going to stop us. Eventually, we finished our mission, and the servers are fixed, but our job was done.

Having one system creates a single point of failure; you’re setting your business up to fail if something doesn’t go according to plan, and plans always change. Living in a digital world trains us to rely only on technology is a crutch, when we no longer have it, what are you going to do?

Documents to keep on hand for your business:

Receipts

Bank Records / Credit Card Statements

Invoices

Charitable documents

Implement a tax strategy

The best way to prepare for taxes is to implement a tax strategy when it comes to taxes, strategy matters. When studying your business and your operation against the current and new tax laws, deciding what strategy to implement is tricky. Are you planning for the next year or the next five years?

Implementing the proper strategy comes after you understand the battlefield and your capabilities. For instance, we can’t apply deductions to items you don’t have or don’t qualify for, not every business uses the same strategy, and not all companies to pay taxes equally.

If you feel like you’re overpaying in taxes, you might be, especially if you don’t have a tax strategy. Going to war without a plan is a sure way to fail, skipping a tax strategy is a sure way to overpay in taxes.

Hire a professional

If your plan is to save money on taxes, hire a professional, their less likely to make a mistake, and you’re liable to learn a few things. The tax preparation is going to cost you, but compared to the money you’ll save, you will see a return within a few years, you’re also taking away the potential for a major disaster.

The difference between amateurs and professionals is seen in the results. Going to the gym will get you going, but hiring a personal trainer will get you into shape. The exchange of knowledge gives you your desired outcome, it cuts out any testing or stumbling on your part, and it gives you a guided path to walk.

To transition from an amateur to a professional, to surround yourself with professionals, to observe them and learn from them. We ask questions that bridge the gap between your unknown and they are known. If you’ve ever tried to change the oil in your car, you’ve walked that bridge.

Our parents teach some of us, and some of us learn from the internet or our local mechanic. Learn, ask questions, and go through the process ourselves. It can take a few times to but once accomplished. It’s easy to see the path we walked.

Changing the oil in your car is a simple task. Taxes are complicated, each year, they become more complex because the tax laws will vary or your business will. Hiring a professional allows your business to stay adaptable, saves you time, and cuts a clear path to your goal.

Follow your tax plan

The easiest thing to do when given your tax plan is to hand it over to a tax preparer and let them submit the package for you. Once you have an idea, follow the steps, if you deviate from your tax plan, you may find your business missing out on the tax advantages you discussed.

How often do we get in our way? Almost all the time there’s a personal development industry built on helping people get out of their way.

We all know to become fit, wealthy, and secure; the information is at our fingertips. But there’s a gap in the people you are, and those that aren’t, knowing what to do and doing it are two different things. Understanding our behavior, psychology, and motivation is the key to success in any project.

The strategy isn’t for you. It is for your business. You only need to file it accordingly.

In theory, theory and practice are the same.

In practice, they are not. Albert Einstein 

Bottom line

These ten tax secrets will prepare you, but the common ingredient is you, if you haven’t completed a tax plan, speak to our tax professionals today. The tax savings you generate aren’t just for this year but for every year to come as long as you’re operating your business.

Without a tax plan, you’re maximizing, and not minimizing your tax payments, reducing your overall business revenue. The best way for you to increase your business’s revenue is by reducing expenses and costs. Taxes fall into the category of costs you have not a choice but to pay.