Tax Saving Tips: Keep More of Your Hard Earned Money in Your Pocket
During Tax Season, everyones biggest concern is how to keep from paying in more taxes. Often its too late during those lag months to do anything different, but there are a few things you can do now to plan for next year.
1. Put a Tax Savings Plan in Place, and Use It.
Discuss your tax issues with your Tax Preparer and put a plan in effect now for this years income to save money on next years taxes. By creating a Tax Plan & Budget now, you will have an active lead on what you should be doing during each quarter, not only to make your business more profitable, but also to save those extra dollars you pay to IRS and the Government.
2. Use investment, tax deferment, and alternate income sources to cut taxable income.
Invest in your future, for a time when you wont be making as much money, so youll have a lower tax bracket. Put money in savings for your childrens education and defer your tax costs until you have fewer children at home to support. IF your children literally do work in your business, put them on the payroll, let them pay their own expenses for summer camp and education, and reduce your tax burden. They paychecks are deductible, summer camp and education is not.
3. Adjust billing, collection, and payables for maximum tax advantage.
Yes you can defer billing a client until after the New Year, to avoid taxing that income in the current year. It may or may not be advisable, depending on the client. Prepaying for long term services can increase your deductions. Providing you really do use the services, this is an excellent method of reducing taxes.
4. Document your expenses, keep good records, and write a daily activity diary.
Document everything, no matter how trivial, keep good records of your activities and expenses related to business. When your receipts are confirmed by a diary entry, IRS cant argue with your deductions.
5. Be a Good Steward of your Money.
When your bills are due, pay them. IRS understands the value of punctuality. They charge penalties for being late. Penalties increase your Tax Debt. So, its always best to pay your Tax bills when they are due or before.
Donations, time, money, and objects are deductible on some level, keep good records to determine your legal donation limits and prevent overpayment of taxes.
6. Work from Home
Home based businesses get the cream of Tax Deductions. These deductions are legitimate if you have proof. Your daily diary will provide active proof of your business operations, duties, and deductible expenses. If in doubt write it down. Ask your tax preparer to be certain.
7. Incorporate Your Business
Corporations pay less for the same Taxable income. In general, this statement is true. However, before going to the expense of incorporating your business, ask your Tax Preparer to advise you. It may not save enough money to pay for the legalities of incorporating.
There are many ways to save money on your taxes. These are just a few of the more popular methods. If youd like more information, contact your Tax Preparer or visit http://taxprep101.blogspot.com
Jan Verhoeff focuses her interests during the early part of the year on Tax Prep. Business Development includes Tax Preparedness, Business and Marketing Plans, and understanding how to set up a business for maximum profit. Visit http://brandyourmarket.com for more helpful information about setting up a profitable business and being prepared for Tax Season.
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