Learn From This Year’s Tax Return: Tips for the Self-Employed
Summer is just around the corner and you are looking forward to relaxing a bit, right? It’s probably safe to assume that reviewing the tax return you just filed is not on your list of to-do’s. However, if you want to achieve your goals of having a better financial future and more money in your pocket, resist the urge to file away and ignore your 2018 return. Instead, take a few minutes to answer the following questions:
Am I paying the right amount of tax?
If you had to write a large, unexpected check to the IRS or if you received a big refund, we suggest you take a look at your estimated payments. If you had to pay more tax than you were expecting, increasing your estimated payments during the year may reduce the burden of a large tax bill later. If you received a big refund, you may want to lower quarterly payments and keep more of your cash during the year. Of course, always play it safe when it comes to taxes. Be sure to have a conversation with your tax professional before changing the firm’s recommended estimated payments.
Was it painful to file my taxes?
If you found it arduous to file your taxes on your own and you are not completely confident that you accurately completed all the proper forms, it’s a good idea to talk to a tax professional. A tax pro will ensure that forms are completed correctly, new tax laws are applied to support your unique situation, and that you claim the proper deductions. This might just help lower your tax obligation next tax season.
Did I take advantage of all available tax deductions and credits?
By taking some time to review your return with a tax professional, you may identify added deductions that can help lower your tax burden. You want to ensure that you are taking advantage of all deductions, such as those for travel, meals, equipment, healthcare and home office space.
Am I provoking an IRS audit?
If you had a significant amount of deductions and they are all legitimate and fully documented, you’re probably fine. However, if you are being generous with your write-offs, especially those that are related to dining and travel, you may draw extra IRS attention and potentially get audited. As you take a post-tax-season look at your return, be sure to also review the IRS guidelines for business expense deductions. If in doubt about any guideline, talk to an accounting professional.
Reviewing your current year’s tax return offers a clear picture of where you stand financially and what you can do to fair better next year.