Tax season is over. You must have filed your previous year’s taxes within the 18th of April 2022. Being done with that pile of tax stress was a great relief.
Although thinking about the tax is the last thing you want, now is a great time to have a head start for next year’s taxes. If you begin organizing and planning from now, you will have a much easier tax season next year!
With that, Ahad&Co brings you some helpful tips to prepare for the next year. These tips will make your upcoming tax filing more organized and less stressful.
1. Open a bank account to separate your business and personal expenses.
One of the most common confusions we face in tax season is distinguishing personal expense from business expense. The best way to avoid this problem is to open a separate bank account for your business. Make transactions separately on these individual accounts.
The separated bank account will save time during your tax season because you won’t have to struggle to figure out the expense.
2. Systematize your Documenting Process:
Whenever we receive expense receipts, we usually throw them inside a drawer. This haphazard practice jumbles your records. Even on our computers, many of us are pretty nonchalant when sorting our documents. When this mixing occurs, many forms get lost. Often it becomes difficult to find them, making the process time-consuming.
So start implementing a systematic process to document your records. Make sure to have both hardcopy and softcopy versions of your documents. Keep your documents scanned.
Have a backup of your documents in multiple drives such as Flash Drive, Cloud Drive, Phone, etc.
Use email tags for important electronic documents relevant to your taxes. It will save your time on searching through email history during tax time.
3. Understand Your Deductible Expenses
You might owe tax this season because you don’t make quarterly estimated tax payments. There may be income from other sources from which tax isn’t withheld. Interest, dividends, and any income earned from your business consulting or contracting work include it as part of your total income.
The following conditions can help you determine whether or not you need to pay tax expenses.
If you expect to owe less than $ 1,000, you are not required to make estimated tax payments.
If your federal tax withholding amounts to at least 90% of the current and 100% of the previous year, you do not have to pay an estimated tax payment.
If your adjusted gross income on your tax return is over $150,000 and you expect that your income tax withholding will be at least 110 percent of the total tax you owed for the previous year, then you are not required to pay estimated taxes.
If you do not apply for the above three conditions, you must make estimated payments using Form 1040-ES.
4. Adjust Your Withholdings
If you are an employee working at a company, your employer withholds a certain amount of money. Withholding tax is the amount of money an employer deducts from an employee’s gross wages and pays directly to the government. The amount withheld is a credit against the income taxes the employee must pay during the year. Thus, it would be best if you looked over your tax withholdings. Often many taxpayers have more taxes withheld from their pay than is required. Since it’s an off-season, reviewing your withholdings is a good time. If you are a W-2 employee, federal tax is withheld from each paycheck.
So make sure to adjust your tax withholding by submitting a new Form W-4 to your employer’s payroll or human resources department.
5. Stay Updated
Every year, various updates on tax laws and announcements occur. These tax changes can often favor taxpayers when it reduces their tax price. Keep up with the IRS updates through IRS.gov.
Besides, Ahad&Co is always there to inform you about tax updates through social media handles.
6. Start Taxes Earlier Next Year
Do not procrastinate till April or else you will be digging holes in your own pit. Filing taxes in a haste will result in confusion, errors, and gaps. You might not be able to meet the tax deadline, resulting in penalties.
So start preparing and filing your tax from January. Head towards a CPA’s office as early as possible because the closer the tax deadline gains upon the waiting time gets longer.
7. Consult a Tax Professional
Every year your life may undergo several changes, such as moving to a new city, getting married, or having a baby. These life-changing events can impact your taxes, making you all puzzled. That’s when you may need a tax expert. A tax expert will save a lot of your time by looking into your records and analyzing the changes that can benefit your tax filing process.
In this case, Ahad&Co is just a call away. You focus on your work while we take care of your taxes.
That’s all about the strategies and tips you can incorporate into your tax filing. Starting now, take small steps to organize your tax documents for the year. Hopefully, the above tax tips and strategies will make your upcoming tax season much smoother.