Tax time is around the corner for most people (March 15 for S Corps and partnerships, April 18 in 2022 for sole proprietorships, single owner LLCs, and C corps). You want to make sure you file by the due date and get all the possible deductions without getting audited. Sharon Eason of Chase, Eason, & Associates, Inc. provides some tips on best practices for filing.
Hold on to your records
It’s recommended that you hold on to your returns for at least two years to three years if you file for a claim or credit. Otherwise, the amount of time you should keep your documents depends on circumstances such as whether you underreported your income or owe additional tax. To be on the safe side, it may be best to just keep your documents indefinitely. This is made easier with access to online file storage services such as Dropbox or Google Drive.
Know Your Numbers
It’s best practice to conduct your bank reconciliations at the end of every month. This allows you to avoid possible fraud and gives you time to make any needed corrections. It also gives you a chance to find any outstanding accounts receivables or account payables so that you may collect or pay your invoices before you go too long without noticing.
You Can Hire Your Kids
Finding employees may be hard for some people, but you may be able to find someone to work for you right under your roof. If your kids are under the age of 17, you may hire them and not pay towards their social security.
Know your Deductible and Non-Deductible Expenses
There is sometimes some confusion on whether expenses like meals, travel or home offices are deductible. The truth is many of these expenses are deductible, but with caveats. For instance, home offices are deductible if it’s “used regularly and exclusively” for business purposes. A desk used exclusively for business purposes set in a specific space in your home is deductible, while your kitchen table, though you may use it to conduct business, is not if you also eat dinner on it. Work-related travel expenses are deductible and no receipts are required if they total less than $75. Medical insurance is deductible if you’re self-employed and aren’t eligible to receive insurance from a spouse’s place of employment. In this case, the health insurance you purchase for both you and your family can be deducted from your taxes
Answer IRS Letters
If the IRS writes you, respond to them as soon as possible. It may not mean you are getting audited, but you won’t know if you hide the letter in your drawer because you are too scared to open it. It could be something simple such as a request for a missing form. Whenever you manage IRS correspondence, the best advice is to not panic but to be proactive.
Check out Sharon’s webinar on Finishing the Year Financially Strong to get even more tax tips.
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