Making Taxes Easy For You
Making Taxes Easy For You
Tax season is perhaps one of the most stressful or happy time of the year. For self-employed individuals and small business owners, this season means the painful gathering of documents such as 1099s, bank statements and tax forms to complete their returns.
There is a way to release all this tax season tension: accounting and tax apps. Yes, apps. Same as we use many apps during daily life: navigators, email, social media, there are apps that help you easily navigate and calmly go from tax season stress to tax filing and even getting your refund.
If you are self-employed, chances are every year you go thru the same pain to file your income tax report guessing what you can deduct and where are the numbers at. If you follow the estimations of non-licensed accountants you will file your tax return with incorrect amounts. The consequences are you may later receive a letter from the IRS.
This is a chance that the IRS audit you if you claim:
- A flat number of miles instead of the real number: there is an app: mileiq, for keeping up with miles.
- Home Office Deduction: unless you really have a room available at home for the sole purpose of a home office, you are better off not claiming this deduction.
- Depreciation: avoid the mistake of claiming miles and depreciating your auto.
- A net loss: any self-employed activity produces profits.
Quarterly Tax payments
If you are Self-employed you pay taxes when you file your return including Social Security and Medicare Taxes (FICA), for significant amounts sometimes in the thousands. But the same is true for employees, just they pay it to pay check to pay check and half of the FICA. This is shocking not only for the amount but also for the cash outflow that compromises your budget.
You can easily fix this by filing quarterly with the IRS. If your income is similar to last year, just divide by four the amount you paid last year and pay quarterly at: https://www.irs.gov/Payments/Direct-Pay
Accounting Software: Quicken
If you want a more accurate tax report, use Quicken, but link it to your bank accounts and classify the transactions monthly. Quicken is good because it syncs to Turbo Tax with one click.
Tax Software: Turbo Tax online
Turbo Tax is very useful to complete your taxes. You can input the amounts manually or import them from Quicken and file online. Online filing is just a click a way.
One of the best tools to keep your books up-to-date is Quickbooks Online. Service is very affordable and if you do it thru your accountant you get 50% discount. Quickbooks Online also has an app very useful. You just need to classify the transactions monthly. If you use it day-to-day sending bills and printing checks you just need to reconcile it at the end of the month.
Small business sometimes doesn’t pay their employees with payroll but with 1099s. This saves them 7.65% of tax expenses. If you are doing that, at least put yourself on payroll, otherwise the IRS will see empty the payroll line on your report and may select you for an audit. Payroll is easy with Quickbooks Online and you can do it paperless with a click and filing all federal and State forms.
Typical forgotten Business Deductions:
- Startup Cost up to $5,000
- Special Depreciation rule up to $500,000
- SEP IRA up to 25% of your yearly paycheck
- Home office expenses
You may be selected for an audit if you claim:
- Auto miles on your business and on your personal report. This is called “double dipping”.
- 100% of auto miles. Play safe and claim 50%.
- Personal expenses as Meals and Entertainment
- Personal Travel as Business Travel Expenses
The IRS will send you a letter if you claim such expenses beyond the healthy limits.
Small Business, in general, are subject to taxes on:
- Federal Income
- State Income
- Social Security
- Local Business Tax Receipt
- Personal Property Tax
- Company Annual Maintenance
Business Tax Software: Intuit Tax Online
Tax filing for small business is a click away: Quickbooks Online syncs with Intuit Online. You can easily transfer the info of your business into Intuit Tax Online if you use Quickbooks Online.
Business Tax Software: Turbo Tax
Turbo Tax is good is you use Quickbooks Desktop. Filing your business taxes is a click away. Turbo Tax easily syncs with Quickbooks Desktop but you cannot automate payroll with Quickbooks Desktop, needing to use EFTPS.gov for payroll payments.
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If you have a W2 and like to receive a large reimbursement, check zero deductions and select single even if you are married on form W4. Ask you supervisor and request the change. Au contraire, if you want to receive more money from your paycheck, do the opposite: select married and report all of your exemptions: kids and wife.
Saving for retirement is easy by opening an IRA and contributing up to $5,500 or contributing to your 401(k) plan.
You can claim the following expenses even if you are an employee, providing they are unreimbursed:
- Professional Subscriptions
- Auto Miles
- Dues to Professional Societies
- Job searches expenses
- Legal Fees
- Union Dues
- Home Office cost
All taxpayers are entitled to claim:
- Mortgage Interest Deduction
- Charitable Donations made to an IRS approved Exempt Non-Profit
- Earning Income Credit
- Child Tax Credit
- Student debt interest
If you own a property for rent, remember that a max of $2,000 is deductible as repairs and maintenance per event.
If you have holdings in the Stock Market, you do not need to report transaction per transaction. Instead, report the totals of basis and sale to determine profit or loss and attach a copy of the annual report received from the Brokerage Firm when you are filing your return online. You can also deduct:
- Capitals Gain Tax
- Capital Losses up to $3,000
- Investment Expenses up to 2% of your AGI
Online tax filing is easy and free, Turbo Tax, Tax Act, etc. Good luck and enjoy your refund.
Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.
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Thanks to FAS & CPA Consultants and Fulton Abraham Sanchez, CPA, I was able to resolve a debt of $479,677.71 that I had with the IRS.
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