We’re right in the middle of tax season, and we’ve already covered tax filing tips for small businesses, and some myths about the IRS audit process. But while we’re in this tax season, it’s important to know that the decisions you’re making today will have an impact on how your taxes look next year.
“Tax season” can be misleading because it puts a specific timeframe on when a lot of people are looking at their finances and how taxes apply to them. The best way to view “tax season” is that every day is tax season. So, what are some decisions you can make between now and the end of 2022 to get the most out of your taxes?
Document all expenses
Every dollar you spend could factor into your tax filing. This includes things like medical expenses, retirement savings contributions, charitable contributions, and other commonly overlooked deductions.
You should keep a receipt for your records, especially if you believe you qualify for more than the standard deduction. Not only will these receipts make it easier for you to calculate your deductions come tax time, but they will protect you in the event of an IRS audit.
Get ahead of expenses
Your business expenses can be a big source of deductions when you file taxes and timing matters. If you know you’re going to be adding new technology or furniture or other major expenses to your business, you may consider budgeting for them by the end of the year. For example, if it’s November or December and know you’re going to need a new computer, why not make the purchase by the end of the year and get the deduction included on your tax return for the year?
We don’t want you to look at this as an excuse to overspend and buy things you don’t need, though. Make sure the expenses make sense for your business. This is especially important because if you are the subject of an IRS audit and purchases are found to be unnecessary you may lose out on the tax benefits of the purchase. Buy it because you need it, not because there’s a tax advantage.
Adjust your tax withholdings
If you had a high tax bill when you filed this year or last and your financial situation hasn’t significantly changed, you may want to increase your tax withholdings. Most people just withhold the standard amount from their paycheck but adjusting this allows you to get ahead of the tax bill you’re likely to receive next year. Instead of taking it on all at once, you will now be able to spread the cost throughout the year. Depending on how much your tax bill is and how much you withhold, an increase in your tax withholding could actually result in the IRS owing you money next time around.
Any time you have a major financial change, you should also consider this option. It’s not just for people who anticipate high tax bills. This is a tool to provide peace of mind to individuals who either have a lesser understanding of how taxes are calculated or have a change to their financial situation without knowing how the change will impact their taxes.
Contact an attorney Tax season is hard enough to navigate on your own, so you shouldn’t have to take on the IRS on your own. Do everything you can to maximize your tax savings this year. Contact the legal team at Robert Boeshaar, Attorney at Law, today! We help individuals and small businesses resolve their disputes with the IRS.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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