Once tax season begins, your opportunities to save on taxes become extremely limited. Your accountant is likely extremely busy and cannot devote sufficient time to reviewing everything in depth. Similarly, not knowing how much tax you owe will cause considerable stress. Preparing for tax season is essential for the resilience and survival of small businesses.
If you are planning for the upcoming tax season, the best time to begin is in November, the month our tax preparer in NYC recommends. Starting this early gives you ample time to organize everything. Let’s examine the detailed guide on how to navigate the tax season.
Gather Every Document
Gather all of your financial documents and receipts, as well as your business’s bank and credit card statements. If you wrote checks but do not have records, request copies of canceled checks from your bank. Some banks may charge a fee for this service, but the vast majority offer it for free. However, you also have the option of storing your financial documents using online tools.
Start Accounting Catch-Up
If you do not keep monthly financial records, you must perform catch-up bookkeeping. If you can do it yourself, purchase bookkeeping and accounting software such as Quickbooks or Xero on January 1 and begin entering all the transactions. If you can’t, our CPA in NYC is always available to give assistance.
If you have an accountant or bookkeeper, you should contact them immediately and request that they begin working on it. Some of our clients send us their bank statements in November in order to get a head start on their bookkeeping for the year.
Adjust Your Accounts
After all transactions have been imported and expenses have been categorized, ensure that all bank and credit card accounts have been reconciled by October or November. You may need to modify journal entries to reflect depreciation, amortization, loan interest, inventory, and Accounts Receivable.
You will then have a Profit & Loss Statement and Balance Sheet for the preceding 10 to 11 months.
Commence With Your Profit and Loss Statement
After obtaining these financial statements, begin by reviewing your P&L and all income and expense items. Ensure you did not overlook any expenses. Many business owners use their personal accounts to cover legitimate business costs.
Due to this, you should pay close attention to the accounts for travel, transportation, meals, and supplies. Moreover, you must include all of these business deductions.
Evaluate Your Sales
Examine your sales and write off any invoices that are uncollectible. Consider delaying your tax collection until January if you are a cash-based taxpayer. This will have an immediate impact on your taxable income as a result of the decrease in sales.
Similarly, you should examine your business’s tax structure in order to simplify the process. Consider electing S-Corp if you have an LLC and are filing as a sole proprietor. Our business tax accountant in NYC can give enlightenment about tax structures if you need so.
Boost Your Expenses
Consider boosting your spending. If necessary, charge your credit cards to the limit in order to buy supplies and other equipment. Even those bills that are not yet due should be paid. For instance, you can pay your utility and telephone bills. Purchasing additional inventory, paying off your loan, or reducing your credit card balance are not expenses, so they will not help you.
There is an unlimited deduction for SUVs and Trucks, so you can purchase new vehicles if necessary.
Consult Your Accountant
Consult with your financial planner and accountant to determine which retirement plans could result in additional tax savings. You should be in active contact with your accountant or financial planner during tax season preparation. They are qualified to advise you on the best way to reduce your tax liability. If your accountant has gone missing, Ahad&Co’s tax preparer in NYC will be there for you.
Independent Contractors Should Not Be Forgotten
If you have paid independent contractors, ensure you have their W-9 forms. Even if you did not perform catch-up bookkeeping correctly, you should still be able to generate a good report listing your vendors and independent contractors. file 1099s. Very little time is available for tax season preparation.
If you follow all of these steps, you should have a stress-free tax season and save a significant amount of money.
Frequently Asked Questions (FAQ)
Why are tax refunds so low this year 2023?
According to Internal Revenue Services, the chances of a refund could be low in 2023 because taxpayers did not receive stimulus payments this year. Typically you get a federal rebate when you have overly paid yearly taxes or withheld more than the amount you owe. As of 2022, there was no stimulus payment, so there is a reason why you won’t get any refund.
What Deductions can I Claim without Receipts?
You can claim everyday items without Receipts on your tax Deduction, Maintenance, Loan interest, Registration, insurance, and Fuel. Keep as many receipts as possible, but if you misplace or lose, remember you can claim up to $300 on your taxes without proof of a deduction.
What Expenses can you claim on your Tax Return?
Taxpayers can take advantage of numerous deductions each year that can help them pay lower amounts of taxes. You can claim these Expenses on your Tax Return, Property Taxes, Mortgages Taxes, State Taxes Paid, Homeowner Deductions, Charitable Contributions, Medical Expenses, and Retirement Credits.
How can I Get a Bigger Refund from the IRS?
Following some strategies can go beyond and proper ways to reduce your tax liability and help to get a Bigger Refund from the IRS.So now pay no more than you owe. That is, Rethink your filing status, Embrace tax deductions, Maximize your IRA and HSA contributions, Remember timing can boost your tax refund, and Become tax credit savvy. These strategies can assist in a Bigger Refund from the IRS and fundamental ways to tax liability and time.
What forms do I need to file my taxes for 2023?
A taxpayer should develop a record-keeping system. It can be an electronic or paper that keeps information in one place. This includes year-end income documents such as Form W-2 from employers, 1099 from banks or other payers, and Form 1099-k from third-party payment networks for non-employee earnings. Form 1099-MISC for miscellaneous income, or Form 1099-INT if you were paid interest and documented well. Ensure Tax records are complete before filling. That helps taxpayers avoid errors.