Tax day 2021 is almost here. It’s essential to start preparing ahead rather than wait until the timing becomes too tight to plan in a well thought out way. Here are some things you need to achieve a successful tax day in 2021:
Adequate Records
Before your filing day, you need to get your incomes, expenses, and other information ready. Make sure the documents and receipts show your income and expenses clearly. You can also hire a bookkeeper to help you do the work to ensure you keep accurate records. (We just happen to know some great ones!)
Know Your Correct Due Date
If you are a new business owner, don’t assume all forms are due simultaneously. Based on your business’ structure, you due date may be earlier than expected. For example, businesses with a partnership or Limited Liability Company are usually due a month before corporate companies.
Square Up Your Business Information
Aside from your business name, you’ll require some necessary information to complete your filing. You may need to dig up some of these. Some required information includes:
- EIN or social security number
- Business name, address, and start date
- Accounting method (cash or accrual)
Get Your Paperwork Organized
The tax process will require a lot of paperwork. To make the process less stressful, get all the essential documents ready before filing your tax. Some documents you may need include:
- Forms W-2 and other income records
- Records of all expenses
- Previous year tax returns
- IRS tax statements received in the mail
- Medical expenses and Health insurance
- Childcare Expenses
- Educational Expenses
- Record of mortgage and property taxes
- Records of Charitable donations
Max Out Your Tax-Advantaged Accounts
Your tax rate will depend on your income range. However, you have the option to reduce your taxable income through deductions.
For example, if you spent a lot on medical expenses last year, you may be able to get some relief.
Below are some deductions you can claim;
- Business Deductions
If you’re a self-employed individual, you can claim deductions like travel expenses and home office deduction if you work at home.
- Charitable Deductions
CARES Act allows you to deduct up to 100% of your adjusted gross income (AGI) in qualified charitable donations.
- Medical Deduction
You can also claim a deduction if you spent a lot of medical bills. Currently, you can deduct medical expenses above 7.5% of your adjusted gross income (AGI).
- Child Expenses
You can claim up to your $2000 (per child) with the child tax credit if you have kids. However, there’s an income limit to claim this tax: $200,000 for single parents and $400,000 for married parents.
There are many more deductions you can take, depending on your situation. It’s best to speak with a professional to help you figure out the deductions applicable to your situation.
Develop and Incorporate Tax Strategies
Develop and incorporate some tax strategies to help you make informed decisions with your wealth plan without affecting your next tax payment in 2021. We highly recommend sitting down with a trusted CPA.
Make Tax Deductible Investments Early
Big investments should be made before your financial year ends to help with your tax deductions. Investments like buying equipment or furniture for the office can increase your deductions, and you can only claim them if you invested before the end of your financial year.
Pay Your Debt
If you owe IRS money, you will need a plan on how to pay. You can pay in instalments or employ other payment option that’s convenient for you.
Sign Up for IRS News
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Hire a Professional
Being a business owner doesn’t automatically make you a tax expert. You don’t have to do it yourself; you can seek professional help to help you navigate the tax process, gather documents, prepare your income tax returns and offer financial advice. With a tax professional, you will save a lot of time and money,
In conclusion, the 2021 Tax season might come with a few challenges, especially for business owners. However, with proper preparation and working with the tips above, you will find the process easy.
If you need help getting your records in order or need recommendations for a good tax preparer, please reach out to us. Not only do we have a vast network of people we recommend, but we can help you get your records cleaned up before you send them to the CPA.