Planning, in general smoothens the course along every walk of life. And planning ahead provides the added advantage of forecasting possible scenarios down the road. Many perceive taxes as a once-in-a-year exercise, but it has all the elements of being a year round agenda. To exercise precaution, it is highly recommended that you keep receipts for all expenses and possible tax deductions that you consider claiming. Scanning and electronically filing for better accessibility will come handy for tax preparation services and audit purposes.
If given its daily due, taxes can become a lot less daunting than they are generally believed to be. Let’s take a look at few practices that if followed, will help alleviate the burden and reduce the headaches and gray hairs you’ll accumulate come April.
Adam Spiegel, a Miami-based certified public accountant recommends using the word ‘plan’ as a guiding acronym for the year:
P: Prepare your records ahead of time.
L: List your issues and questions.
A: Analyze your financial statements for accuracy.
N: Note the changes in laws during the year and discuss them with your tax advisor.
1. Forecast filing status
Filing status can have a have an impact on how much you owe in taxes each year. It can also determine whether or not you have to file at all. It’s is a healthy habit to forecast if your filing status will change during the course of the year.
For instance, you may be presently single but with plans of tying the knot by the end of the year. In such a case you may choose between filing a joint or separate return with your future spouse when you file your upcoming taxes.
Conversely, you may be looking to file as a single taxpayer if an imminent divorce is in order during the year, or you may also file as head of household if you’re single and have a child or are taking on another dependent.
2. Look Back to Leap Forward
Now that you would have filed your 2017 tax returns, this would a good time to look back and consider the areas that were the most problematic. This exercise will help tackle similar problems with ease in the coming tax season. Certain problems can be easily circumvented by effecting necessary precaution.
For instance, if you did your own taxes and hit several dead ends along the way, it’s would sound logical to assign the task to someone experienced. While an in-house tax preparer might be too expensive, options like outsourcing that can be effective and budget friendly.
3. Familiarize yourself with new tax rules
It is highly critical to stay abreast with rules that would have an impact upon the taxes. For example, with the implementation of Tax Cuts and Jobs Act that took effect in December 2017 there has been some major changes to the U.S Tax code. These Tax codes could generally mean two things.
- Some of the tax breaks you might have taken advantage of in the past may no longer be available.
- There may be new tax breaks that you could use to your advantage.
4. Contribute to your retirement accounts throughout the year
It is preferable to use an Individual Retirement Account (IRA) instead of saving account. Many taxpayers generally put their saving into a typical bank account that earns taxable interest. However, you can avoid paying tax on the interest each year by depositing money into a traditional IRA instead where the interest will accumulate tax-free. When you do, you might also be also eligible to claim a deduction each year for a certain amount of contributions you make to the account
5. Automate the Accounting process
Accounting solutions go a long way in driving efficiency and accuracy all year long. If you don’t use accounting solution, it’s high time you consider getting one. Gone are the days when installed desktop software was the only possible solution. Today, we have a wide range of online solutions available. As an added bonus, the usage of online solutions helps eliminate the need to invest a large amount of money upfront with the assurance of access to the latest version of the tool. Your accountant can help you determine the best fit, and bonus points if the solution lets your accountant have access to your real-time data.
Still a little too much?
Most of the suggestions mentioned above cater to individuals without complicated tax situations. However, if the taxes seem a bit overwhelming to handle, there always exists the option of hiring tax preparation services. Though one way to go about it would be hiring a solid CPA, this can be a bit too expensive for small businesses. In such cases, Outsourcing is the most practical solution.
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- Bank Reconciliation
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