Business and Personal Tax Planning
You pay your taxes with your hard-earned money. Taxes can be complicated and stressful, and you could waste your time and money if you don’t properly plan or don’t work with the right tax professionals. And whether you are a business or an individual in order to reduce your taxes or increase your tax refund, tax planning throughout the year is critical.
As in most things in life, preparation is always key to success. So start collecting all proper forms, relevant receipts, charity donations, retirement contributions, childcare expenses, etc. And most importantly, find the right tax professional that can help you navigate the complexity and reduce the stress. Working with a tax professional ensures you are deploying the best strategy to reduce the amount of taxes you pay each year.
Business Tax Planning
It's great to have a discussion with your tax planning professional early in the year. But, at that point, you may not know how profitable your business is going to be at the end of the year or what major purchases and expenses you will have. But if you wait until close to year-end to have the discussion, you may have lost valuable time when you could have been taking action. It's best to start discussions early in the year and then meet at least quarterly for updates
What to bring to a meeting with your tax professional
A profit and loss statement. The P&L statement is important because it's the basis for your business tax return, for all types of businesses. Bring a statement showing the current year to date, from January 1 through the most recent full month.
A balance sheet. A balance sheet shows all of your business assets and liabilities and it's useful to your accountant to show any potential tax savings.
Detailed Information about business assets. Business assets you purchase during the year can be taken as an expense, just by meeting some simple IRS requirements. This is a big time and tax prep savings for businesses because it means the expense for these assets doesn't have to be depreciated over a longer time.
Information about your home office. You can take a deduction for your home office space expenses, and there is a simplified deduction. Remember that you can only deduct costs for a space that you use both regularly and exclusively for business purposes.
Personal Tax Planning
it is important to start preparing your documents right away to expedite your tax return. Your preparer may take information directly from you or ask you to complete a questionnaire. Either way, you will need time to gather and organize the information and supporting documents. Remember, the sooner you start to prepare your taxes, the sooner you will receive any anticipated refund.
What to bring to a meeting with your tax professional
Gather your forms: W-2 if you have a job. Various 1099s to report income such as cancellation of debt, dividends, interest and nonemployee compensation paid to independent contractors
Gather your receipts: the receipts that you will need depends on whether you choose to itemize your personal deductions instead of claiming the standard deduction. You can itemize if it produces the greater write-off.
Charitable contributions receipts: if you made donations to charity and itemize your deductions, you need specific records to claim any write-off.
First-year for tax law changes: there are several areas that brought in a slew of changes, including the individual healthcare mandate, the end of the home-equity loan interest tax deduction and changes to state and local tax deductions
List your personal information: you most likely know your own Social Security number, but do you know the Social Security number for each dependent you claim? Jot this down and other information i.e. addresses of vacation homes and any rental property information that is required to complete your return.
Find a copy of last year’s return: can help serve as a reminder of some items that you don’t want to overlook.
The Bottom Line
Start early doing prep work for your income tax so that your tax experience is a smooth one. Ideally, you will have been gathering and organizing your information and receipts all year. And make sure to get in touch with us at VA Accounting and Income Tax. We have over 15 years of tax experience, operating as an enrolled agent to the IRS. We can take the stress and complexity off of your plate. Please come see us for a free consultation.