The United States employs a “pay as you go” tax system, requiring individuals and corporations to make regular payments to the IRS throughout the year based on their income. Failure to meet these obligations may result in an estimated tax penalty, a non-deductible interest charged on the underpaid amount for each quarter. This article explores the nuances of the estimated tax penalty, its current implications, and strategies to avoid it.
Understanding the Estimated Tax Penalty:
Individuals and corporations face the estimated tax penalty if they fail to pay enough to the IRS during the year. The penalty rate is determined by adding three percentage points to the short-term interest rate, with the current penalty rate standing at 8 percent—the highest in 17 years. Notably, this non-deductible interest penalty can result in a net cost exceeding 8 percent due to the rise in interest rates.
Who is Affected?
Employees who have their taxes withheld by their employers need not worry about the estimated tax penalty. However, the self-employed and those receiving income without adequate tax withholding, such as retirees, individuals with dividends, interest, capital gains, rents, and royalties, and even C corporations, must be vigilant.
Avoiding the Estimated Tax Penalty:
Avoiding the estimated tax penalty is achievable through timely and strategic payments. Individual taxpayers have two options: pay 90 percent of the total tax due for the current year or 100 percent of the total tax paid in the previous year (110 percent for higher-income taxpayers). Corporations, on the other hand, must pay 100 percent of the tax shown on their return for the current or preceding year.
Quarterly Estimated Tax Payments:
To meet these requirements, most individuals and corporations opt for equal quarterly estimated tax payments. It’s important to note that the IRS assesses the penalty separately for each payment period, preventing the reduction of penalties for one period by increasing payments for subsequent periods. Even if a taxpayer is due a refund when filing their tax return, penalties for underpayment persist.
Alternate Methods for Computing Estimated Taxes:
While the majority follow the quarterly payment approach, some individuals and corporations can explore alternate methods, such as the annualized income method, for calculating estimated taxes. However, these methods can be complex, requiring a thorough understanding of tax regulations.
In conclusion, navigating the “pay as you go” tax system and avoiding estimated tax penalties is crucial for individuals, the self-employed, and corporations alike. By understanding the rules, making timely payments, and exploring alternative computation methods if applicable, taxpayers can ensure compliance with IRS regulations and minimize financial implications. Stay informed, plan strategically, and make the most of the available options to navigate the complexities of estimated tax payments in today’s dynamic financial landscape.
As we usher in the new year, businesses in the United States are gearing up for a significant change—the implementation of the Corporate Transparency Act (CTA) on January 1, 2024. This federal mandate brings with it a fresh filing requirement for a broad spectrum of business entities, aiming to enhance transparency and curb illicit financial activities. In this article, we’ll delve into the intricacies of the CTA, exploring its requirements, exemptions, and implications for businesses.
The Corporate Transparency Act in a Nutshell:
The CTA casts its net wide, covering most corporations, limited liability companies (LLCs), limited partnerships, and certain other business entities. The central requirement of the CTA is the filing of a Beneficial Owner Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) by December 31, 2024.
Identifying Beneficial Owners:
The heart of the BOI report lies in identifying and disclosing beneficial owners—individuals who control 25 percent or more of the ownership interests in the entity or exercise substantial control over it. Each beneficial owner’s information must include their full legal name, date of birth, complete current residential address, a unique identifying number (from a U.S. passport, state/local ID, or driver’s license), and an image of the document providing the unique identifying number.
The BOSS Database:
FinCEN is set to establish the Beneficial Ownership Secure System (BOSS) to house the BOI data. This database aims to assist law enforcement agencies in preventing the use of anonymous shell companies for various illegal activities, including money laundering, tax evasion, and terrorism. Notably, the BOI reports will not be publicly accessible.
The CTA primarily applies to business entities formed by filing documents with a state secretary of state or a similar official. Additionally, foreign entities registering to do business in the U.S. fall under the purview of the CTA. However, certain entities are exempt, such as larger businesses with 20 or more employees and $5 million in receipts, as well as those already heavily regulated by the government, including publicly traded corporations, banks, insurance companies, and non-profits.
Sole proprietors and general partnerships in most states are exempt from the CTA, providing some relief to smaller businesses. However, single-member LLCs, despite their pass-through tax treatment, are subject to the CTA’s requirements.
While the initial BOI report filing does not expire, businesses must remain vigilant in fulfilling their ongoing duty to keep the report up to date. Any changes in beneficial ownership must be promptly reported to FinCEN within 30 days of occurrence. This continuous monitoring ensures that the information remains accurate and relevant.
The CTA underscores the seriousness of compliance by imposing hefty penalties for failure to adhere to the filing requirements. Businesses that neglect to file the BOI report or provide inaccurate information may face significant monetary fines and, in extreme cases, imprisonment for up to two years.
As the Corporate Transparency Act takes effect in 2024, businesses must adapt to the new regulatory landscape. Compliance with the BOI reporting requirements is not only a legal obligation but also a crucial step toward fostering transparency and combating financial crimes. By understanding the nuances of the CTA, businesses can navigate the reporting process with confidence, ensuring a smooth transition into this era of heightened corporate accountability.
The IRS has recently intensified its efforts to combat improper Employee Retention Credit (ERC) claims. In response to a surge in questionable claims, the IRS has taken several actions. In this article, we will delve into these actions and their implications for businesses seeking ERC relief.
1. Temporary Halt on New ERC Claims:
On September 15, 2023, the IRS announced a temporary stop in processing new ERC claims, effective until the end of the year at the earliest. This decision stems from the IRS’s concern about the rising number of improper ERC claims. While some tax experts and associations support this measure, there are differing opinions. Some believe that all valid claims should be addressed promptly, especially for businesses facing ongoing financial hardships. Despite the processing delay, it’s advisable to submit your claim now to secure a spot in the queue.
2. Slower Processing of Existing Claims:
The IRS faces a backlog of over 600,000 ERC claims, causing delays in processing. The standard processing goal of 90 days has been extended to 180 days, with even longer processing times for claims requiring further review or audit. For legitimate ERC claims, patience is essential, and having proper documentation is crucial. Those with questionable claims should consult IR-2023-169 and engage with their tax professionals to explore options.
3. New IRS Q&A Document:
The IRS released a new Q&A document with a headline that some find problematic. The document aims to provide clarity on ERC eligibility, but its wording may discourage eligible businesses. Clear guidance on qualification and non-qualification is essential. The IRS’s primary mission should be helping taxpayers pay the correct tax, not intimidating them.
4. Watch Out for Red Flags:
The ERC is a legitimate tax credit, but it has become a target for aggressive marketing to businesses that may not qualify. In a September 2023 news release, the IRS warns businesses to be cautious of improper assistance in claiming credits. The example of paying hefty fees to promoters, only to have claims disallowed, serves as a cautionary tale. The rule of thumb is to ensure the validity of your claim.
5. IRS’s Recruitment of 3,700 New Employees for Audits:
The IRS’s latest hiring effort includes the recruitment of 3,700 new employees, primarily for audit purposes. This expansion of the audit workforce will focus on high-income earners, partnerships, large corporations, and promoters. For promoters, the IRS aims to investigate those involved in peddling abusive schemes.
The IRS’s actions against improper ERC claims signify a commitment to ensuring that tax credits are granted to those who genuinely qualify. Businesses seeking ERC relief should be cautious, patient, and well-prepared to navigate these changes and protect their interests. Additionally, the IRS’s efforts to crack down on promoters of abusive schemes aim to maintain the integrity of the tax system.
Two tax term that hold significant value are ‘safe harbor.’
Moreover, five more tax terms that bring great benefits are ‘tax-advantaged expensing without recapture.’
To establish and safeguard your safe-harbor expensing, you, your corporation, or your partnership must formally elect, on your tax return, to utilize the de minimis safe harbor for assets valued at $2,500 or less (or $5,000 with applicable financial statements, as explained later).
This advantageous safe-harbor election removes the hassles associated with:
The term ‘safe harbor’ signifies that the IRS will approve your expensing of the qualified assets as long as you adhere to the safe-harbor rules.
For asset purchases that do not qualify for safe-harbor expensing, there is no issue: Section 179 expensing and Section 168(k) bonus depreciation are both available options.”
Overview
You aim to have your safe-harbor expensing ready for implementation by January 1, 2024, which is why you’re reading this article in September 2023. We’re providing this information well in advance to ensure you have ample time to establish your safe harbor for the upcoming year.
If you’ve utilized safe-harbor expensing in previous years, you should find your prior-year safe-harbor election on those respective tax returns.
If you’re a small business that has chosen the $2,500 limit for safe-harbor expensing, let’s consider a scenario where you purchase two desks, each costing $2,100. The invoice indicates a quantity of two, a total cost of $4,200, along with a sales tax of $378 and a $200 delivery and setup fee, bringing the total to $4,778.
Before adopting the safe harbor option, you would typically have treated each desk as a capital expense, totaling $2,389 ($4,778 ÷ 2). Subsequently, you would have either utilized Section 179 expensing or depreciation for both desks. Additionally, you would have maintained the desks on your depreciation schedule until they were eventually disposed of.
However, with the safe harbor provision, you can expense the desks as office supplies. This eliminates the necessity to include the desks in your accounting books, simplifying your financial record-keeping process.
Safe Harbor
When put into practice, involves the following:
The de minimis safe harbor consists of two options, and which one applies to you depends on whether you have what’s called an “applicable financial statement” (AFS) for your business. If your financial statements have been subject to a certified public accountant (CPA) audit or a similar process, then you have an applicable financial statement.
The key difference between having an AFS and not having one is as follows:
Creating the Safe Harbor
Filing taxes can be a daunting process, but for some, it’s much more than that – tax audits. This stressful situation involves having the IRS put your tax return under a microscope to see if you reported all your income and to see if you overstated your deductions and expenses. The IRS’s main goal in an audit is to assess more taxes, penalties, and interest. It’s an intimidating experience that most Americans dread facing!
An IRS audit can cause even the most squeaky-clean of taxpayers to become fearful and anxious when faced with defending themselves to an auditor. It’s understandable why the majority feel powerless in this situation. You also have to understand and get comfortable with, in the eyes of an IRS auditor, you are guilty until proven innocent. Navigating the tax code on your own is not a good place to be.
Tax audits don’t have to be a source of fear as long as you’ve remained compliant with all the rules and regulations. The best way to ensure peace of mind is to work with an experienced Tax Resolution Specialist who represents clients in such matters and has a good track record. Contact our firm for a complimentary no-obligation consultation to assess your situation. https://calendly.com/premierbusinessstrategist/freeconsult
An IRS audit can be a very time-consuming and intrusive exercise that can include a visit from the auditor. Audits can also be conducted remotely. This method, known as a desk audit, involves sending documents through fax or mail to evaluate accuracy and compliance with established law.
Filing taxes is a complex process and the IRS seeks to ensure accuracy by auditing income tax returns. These examinations may be focused on certain deductions, particularly if taxpayers have claimed for more than what their reported incomes suggest – but this does not necessarily indicate any wrongdoing or misconduct. The IRS can also select your return to be audited for no reason at all. These are referred to as “random” audits to ensure compliance with tax laws.
Taxes are a fundamental pillar of our society and the government strives to ensure that everyone is compliant. To this end, random audits from both Federal and State authorities may be conducted in order to verify taxpayers’ income as well as expenses incurred throughout the year; making sure all taxation payments due remain accurate.
Preparing for a tax audit should be an ongoing process. To avoid any problems, ensure that all deductions taken are backed up with proof and every receipt is kept on file along with the return – you never know what may arise in the future! It’s important to remember: only declare items that can easily be defended – your documents are a crucial piece to your defense. Ensure each tax record remains safely stored away for at least seven years as per IRS regulations.
Protect your finances and future by taking the time to review your tax returns before signing off, even if you have a professional do them. A thorough examination of the documents will not only help ensure accuracy in filing but also offers an invaluable opportunity for you to gain knowledge on taxes – safeguarding against potential penalties or interest charges related to inaccuracies down the line.
Tax audits can be intimidating, but with a little foresight and the right representation it doesn’t have to cause stress. Staying organized throughout the year is key for having peace of mind when tax season rolls around. Finding an experienced professional who understands your individual needs will help make dealing with the audit as painless as possible.
Take the worry out of representing yourself in front of the IRS, which is like going to court without a lawyer. Let our expert team lift this from your shoulders and navigate the IRS on your behalf. Schedule a no-obligation consultation to explore your options and get on track toward permanently resolving any worries you have over having to meet with and defend yourself in an IRS or State income tax audit. https://calendly.com/premierbusinessstrategist/freeconsult
Paying taxes is a fact of life, but when the amount is excessive, you may not have the funds to pay in full. Making a mistake on your taxes can be costly as well, and if you plug in the wrong numbers, the IRS will surely come calling.
Whether you owe money to the IRS due to an innocent oversight, a lack of funds, or something else, ignoring the problem will not make it go away.
Once you owe money to the IRS, the clock is ticking, and all the while penalties and compounded interest will be piling up. So what should you do if you owe back taxes? Here are some critical steps to take.
Until you know how deep the hole is, you will not be able to start digging your way out. Before you do anything else, you should assess the situation, going through your old tax returns, reviewing communications from the IRS, and adding up what you owe the tax agency.
Once you have assessed the situation, you will be in a better position to make concrete plans. If you owe a lot of money, you may not be able to pay it off all at once, but with the help of a tax relief professional, you may be able to come up with a suitable repayment plan or you may be able to settle for less than you owe.
Owing money to the IRS is no fun, but you will have to resolve this one way or another. Hopefully, you can work out a more favorable payment plan
with the IRS, one that might allow you to pay a reduced amount, but that will depend on your income, your allowable expenses, and your assets, if any.
It is important to review your monthly household budget carefully if you owe back taxes to the IRS. Every dollar you can pay back is one less dollar you will owe interest on, so think about where you can cut back and how you might be able to free up some cash.
The bad news is that you owe back taxes to the IRS. The good news is you may be able to settle the entire amount, including penalties and interest, for a fraction of what’s owed through the IRS’s offer in compromise program.
If you qualify for one of those programs, you may be able to settle your debt for less than you owe, but this is not something to tackle on your own. Work with a tax-relief expert, both to identify the proper programs and to make negotiating with the tax agency easier and more effective.
You can use the budget you reviewed earlier to identify sources of income and resources you have access to. Once that information is presented, the tax-relief expert can help you find a suitable tax compromise plan that just might save you a lot of money.
Time is of the essence when you owe money to the IRS. Once those back taxes are assessed, the clock is ticking, and every day that passes will mean higher penalties, and compounding interest.
If you want to put your tax debt behind you once and for all, you will want to act fast. The sooner you start working on your tax resolution plan, the sooner you can take your financial life back.
To help ease the stress from your situation, we offer a free, no-obligation consultation with one of our tax resolution experts. You don’t have to worry about confidentiality or cost because the consultation is free with zero gimmicks or commitments. Schedule an appointment with one of our tax resolution specialists today by clicking on this link: https://calendly.com/premiersmlbus/consult .
When you owe back taxes and can’t afford to make any payments, then it may be time for a special tax status known as currently not collectible. This means that your debt is still considered valid even though there’s no chance of recovery right now. When you’re approved for currently not collectible status, the IRS can no longer garnish your wages or seize any property.
Now, don’t forget about these debts because the IRS is still looking for payment.
The IRS will place your account in currently not collectible status if you can’t pay both back taxes and reasonable living expenses. You may request this by submitting the proper form with documentation that proves how much income you have left over that is available to make a payment, along with any assets that have been sold recently to cover mounting debts – like homes!
To qualify for the currently not collectible status, you will need to put together a case that you will present to the IRS. Gather copies of your bills, proof of your income (pay stubs, bank statements, alimony, etc), and your investments. It is important to document your inability to pay so that if the IRS determines you cannot afford your necessary expenses, it can grant you status.
When dealing with the IRS, it is best to have a professional in your corner. The IRS can be very intimidating and might ask invasive questions that could land you deeper into trouble than before if you do not know how to answer properly. Remember – they are not friends of yours; their job entails collecting what they believe you owe them so make sure any interaction stays as simple and effective as possible. That is why it is crucial to reach out for help from one of our tax resolution specialists.
If your status is approved, it does not mean you do not have to file your current and future taxes. This status only applies to your back taxes that the IRS is looking to collect. The currently not collectible status is simply a bandaid to help you get back on your feet. That way you can put yourself in a better position to make a payment in the future. The IRS may review your status every year or two if it looks like there is potential for repayment. You will only be able to keep the status active if you still can not make a payment on your back taxes.
The IRS is an institution that prides itself on being collections-oriented. They will try to collect outstanding taxes for only 10 years from the date they were assessed against you. Once the 10 years is up, the IRS can no longer collect the back taxes. This also applies if you have the currently not collectible status. If you do not have the status, are in an installment agreement, or have an offer in compromise pending, the IRS can garnish wages and add more penalties to your case making things worse for you as well as your wallet.
In today’s tough economic climate, many families are struggling to make ends meet. If you’re worried about the IRS garnishing your wages or levying bank accounts, or filing liens against your property for non-payment of taxes you owe – then reaching out may give you some peace of mind.
Our firm will help explain all options available in order to relieve any anxiety associated with these situations because we know how intimidating this can be if nothing has been done before. There is a solution to every IRS problem. Connect with one of our tax resolution specialists to see if you qualify for the currently not collectible status or any of the other IRS settlement options you may be eligible for and the best next steps for your situation. https://calendly.com/premiersmlbus/consult
Dealing with tax issues can often be a challenge and feel overwhelming for many people. Choosing to work with a tax resolution professional is often a great choice if you are dealing with the IRS. These tax relief specialists can guide you throughout the entire process to help you avoid making costly mistakes. You will also have much less stress knowing that an experienced professional is working hard on your behalf.
The IRS is no stranger to audits and it can be a stressful process. If you’ve received a notice from them, don’t panic! There are many things that could help relieve the stress – like working with one of our top-rated tax resolution professionals who will fight hard on your behalf so there’s less risk for penalties or interest charges along with preserving any possible defenses against accusations from this difficult situation.
Here are 5 critical reasons why you need to partner with a tax resolution expert.
When you receive the first letter from the IRS, it can make your stomach drop and your heartbeat a little faster, but working with a tax resolution expert can set your mind at ease because you have a professional working on your case to help you through this gut-wrenching experience. As an added bonus more often than not, once you hire a tax resolution expert you won’t have to meet or speak with the IRS.
One of the benefits of hiring a tax resolution professional is that it gives you access to professionals that do this type of work on a daily basis. Working with a tax resolution expert is especially important if you are dealing with any back taxes. They understand the latest laws impacting your case to help you make the best decision for your situation.
An added benefit of hiring a tax resolution professional is that it can save you a lot of money. Yes it will cost money to hire them, but it’s a lot less expensive compared to having no representation at all. A tax resolution professional also has more experience in handling different issues compared to an accountant, which is why it’s recommended to hire a tax resolution professional if you are dealing with the IRS.
Trying to research all of the regulations involving the tax code is nearly impossible for most people. However, working with a tax resolution professional is a great way to resolve your tax issue as they must keep up to date with the latest laws. These professionals understand all of the in’s and out’s of the IRS maze and can help you negotiate the lowest possible settlement amount or the lowest possible monthly payment amount, allowed by law.
Mistakes can easily happen while you are dealing with the IRS without you even knowing it. Unfortunately, even small mistakes can lead to significant penalties and cause plenty of headaches. Hiring a tax resolution professional is a great option for avoiding these mistakes. They deal with these situations on a daily basis and understand how to work with the IRS to ensure you can save the most amount of money.
Working with a tax resolution professional is something that many people find to be both beneficial and necessary. They can help you avoid costly mistakes when filing taxes or during an IRS audit, as well offer much needed guidance throughout the process of doing so! By partnering up for this kind of work, you’ll have saved yourself tons of time by working together instead of spending hours trying to figure out what’s wrong on your own – while avoiding stress altogether.
If you owe the IRS or state $10,000+ and are feeling blindsided every year by a huge tax bill – don’t wait. We can help! Contact us today for more information about how we’ll work to settle your debt so that it doesn’t become impossible tomorrow. It’s always difficult when faced with major financial problems such as unpaid taxes; however there is relief available through reputable organizations like Premier Business Solutions which specializes in settling debts without going into collections agencies.
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Even for honest taxpayers, the IRS can be extremely frightening. Unlike most other government agencies, the IRS has unbridled power to attach your wages, freeze your bank account and even confiscate your property, and that is enough to send a chill up the spine of any taxpayer.
If you receive a letter from the IRS saying that you owe additional taxes, it is important not to panic. It may be a frightening situation, but there are things you can do to settle your tax debt and get back on the good side of the IRS.
Taxpayers do have options when resolving tax disputes and paying additional taxes due, and simply knowing what those options are can set your mind at ease.
As an expert Tax Resolution Firm, we encourage all readers facing a tax problem, whether it’s the feds or the state, to contact us for a free consultation https://calendly.com/premiersmlbus/consult
Here are three strategies you can use to resolve your tax debt and get on with the rest of your life. Not all of these options will be right for everyone, but it is important to be an informed taxpayer.
Review the Amount Owed And Your Tax Return In Question
If the IRS says you owe money, you should not simply assume they are right. The tax agency does make mistakes (a lot), as do tax preparers and ordinary taxpayers.
Whether you filed your taxes on your own or hired someone else to do it for you, it is important to examine your return and compare what you find with what the IRS is claiming. It pays to seek professional help for this tax review, even if you originally filed your own taxes. A professional with IRS experience may be able to uncover errors and inconsistencies you would have missed on your own, and that could end up saving you money.
There is no guarantee this review will eliminate the extra taxes the IRS says you owe, but it never hurts to be sure. There have been many cases in which taxpayers who thought they owed money to the IRS ended up owing nothing – or even being due a refund from the IRS.
Set Up a Payment Plan
Getting a notice of additional tax due from the IRS is frightening, especially if you cannot afford to pay what the agency says you owe. Keep in mind, however, that you do not necessarily have to pay the bill all at once.
The IRS is often willing to set up payment plans with taxpayers, and those payment plans could make paying what you owe easier and less stressful. Once again, it is a good idea to seek professional help and guidance here – the IRS can drive a hard bargain, and you do not want to end up with a payment plan you cannot afford and wind up defaulting on it.
If you fall behind on the payment plan you agreed to, you could be subject to additional enforcement action, including the tax agency garnering your paycheck or seizing funds from your bank accounts. Getting the help of a tax resolution professional upfront can help you avoid these serious consequences.
Explore an Offer in Compromise Settlement
If you are truly unable to pay the money the IRS claims you owe, you may be able to work out a (much) smaller lump sum payment. The IRS may not advertise this program, but they are often willing to work with taxpayers by accepting lesser amounts, especially if those taxpayers have little in the way of equity in assets and a limited income. Sometimes these settlements can be for a fraction of what’s owed if you qualify. We offer a free no-obligation consultation to find out if you qualify https://calendly.com/premiersmlbus/consult
If you plan to explore this last option, it is critical that you work with a tax resolution expert. An offer in compromise can be extremely complicated, with legalese and language that can be difficult to understand. You do not want to make a misstep here, and you want to ensure that you are only paying the lowest amount, allowed by law, in the settlement of your tax bill.
Few things are as frightening as getting a letter from the IRS. That official-looking letterhead is bad enough, but what the letter says is even worse. If you receive such a letter, you need to take positive steps right away. Ignoring the situation will make it worse and it won’t go away, and the sooner you start exploring your tax resolution options the better off you will be.
If you want the help of an expert tax resolution professional who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain all your options to permanently resolve your tax problem. https://calendly.com/premiersmlbus/consult
A growing number of people are voting with their skills and leaving the world of traditional employment behind. These are the folks who are opening their own small businesses, the people who are embracing freelancing, and the men and women who are using gig work to make a good income.
As this trend continues, many of those newly self-employed individuals are finding themselves at a loss, especially when tax season rolls around. One of the worst feelings is working so hard throughout the year, only to get blindsided by a huge tax bill you weren’t ready for.
While traditional employees can rely on the companies they work for to withhold taxes and report their earnings to the IRS, the self-employed are expected to complete these actions on their own.
To make matters worse, the self-employed often pay higher taxes than their traditionally employed counterparts, leaving them short of the cash they need when April 15 rolls around.
If you get blindsided by a tax bill of more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief https://calendly.com/premiersmlbus/consult
If you are newly self-employed and want to avoid this fate, here are some timely tips for making your self-employment activities less taxing.
Set up a business bank account. It is important for the self-employed to keep their personal and business activities separate, and the best way to do that is with a business bank account. A basic business checking or savings account will make it easier to track your income and expenses, making tax season easier and less costly.
Open a business credit card account. Having a separate credit card in the name of your business will give you an easy way to pay expenses applicable to your self-employment income. This can make expense tracking, reporting, and tax filing a lot easier.
Avoid underpayment penalties by making quarterly payments. When you work a traditional job your employer is responsible for accurate tax withholding, but the self-employed are not so lucky. As a self-employed individual you are responsible for paying your taxes on a timely basis, and failing to do so could trigger costly penalties and interest. Making quarterly payments to the IRS and state is the best way to avoid those expensive repercussions.
Track expenses throughout the year, not just at tax time. If you wait until April to add up your expenses, you could miss deductions that would have otherwise reduced the amount you owe. Tracking expenses when they are incurred will help you avoid this underreporting, so you get credit for every penny.
Research retirement plans for the self employed. The self employed have access to some exceptionally generous retirement plans, including solo 401(k) plans and SEP-IRAs. These accounts can sharply reduce the amount of taxes you pay, so do your homework and choose the one that is right for you.
Have your taxes reviewed by a qualified tax professional. When your taxes are simple, doing them yourself is pretty easy. Tax software makes tax filing simple, but that simplicity could be costly when you are self employed. Even if you are confident in your abilities, having your work reviewed by a CPA or enrolled agent could save you a lot of money.
There is a lot to love about self employment, from the chance to work at home to the opportunity to live life on your own terms. Even so, being self employed can be taxing, quite literally, and it is important to plan carefully from the start. The tips listed above can help you reduce your taxes, so you can keep more of the money you worked hard for.
OWE BACK TAXES?
Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen taxpayers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options https://calendly.com/premiersmlbus/consult