One of the many benefits of hiring a tax professional is the potential to save money on taxes. Working with the right tax advisor could potentially result is saving thousands on your tax bill. The reason being is that your tax professional is so much more than just a tax preparer. With extensive knowledge on the tax code and as someone who stays on top of audits, public rulings, tax code chances and updates, there is a good reason to believe that the right advisor will know tips, tricks and strategies to lower your tax bill. Lower taxes means more capital that you can invest back into your business. Here are some ways a tax professional can help lower your taxes.
Accuracy & Timeliness – The Key Ingredients to Save Money on Taxes
When preparing and filing your taxes, it is important to always file accurate tax returns on time. Accuracy and timeliness are crucial for several reasons.
First of all, you want to make sure that the information you provide to the IRS is accurate regarding your income, deductions, and credits. Failure to furnish accurate information to the IRS could result in an IRS audit. The most common reason for IRS review is a mismatch in data between what a taxpayer reports on their tax forms with the information logged at the IRS (provided via 1099’s, W2’s and other forms). If it is determined that fraud was committed, it could result in costly fines of up to $250,000 and/or prison time if there is deemed criminal activity. Always report information accurately and timely to the IRS to avoid raising any red flags.
Being on time is also important because filing on time prevents unnecessary late penalties. Tax preparation can take a lot of time, so getting started on your taxes early is always best. If by chance you absolutely have to file late, be sure to file an extension.
Legitimate Ways to Lower Your Taxes
There are several ways you can legitimately lower your taxes. Deductions and tax credits are both effective at lowering your tax liability. Deductions work to lower your taxable income, which allows you to be taxed less, and credits work at lowering the actual tax imposed dollar for dollar.
In order to qualify as a deductible expense, it has to be determined to be an ordinary and necessary expense. Ordinary meaning other businesses like yours do it too. And necessary meaning that it is needed to run your business your way. Some examples of common deductions include:
- Business Travel
- Continued Education
- Office Supplies
- Operating Costs
- Contributions to Retirement Accounts (IRA, Roth IRA)
- Mortgage Interest
- Rent on Business Property
- Salaries and Wages
- Contract Work
Credits are even better since they reduce your tax dollar for dollar instead of reducing the based on which you’re taxed. Credits are offered by the government to qualified taxpayers that meet certain criteria. Some popular tax credits are:
- Child Tax Credit
- Earned Income Tax Credit
- Lifetime Learning Credit
- Small Employer Pension Plan Startup Costs Credit
- Rehabilitation, Energy and Reforestation Investments Credit
- Qualified Research Expense Credit
- Retirement “Savers” Tax Credit
Some of these are available to individuals only while others apply only when there is business activity. It is important to understand (or have an advisor who understands) what constitutes qualifying activity.
Expert Tax Planning Strategy For Lower Taxes
Under the guidance of a tax professional, you have the ability to plan your tax year accordingly. You can time major purchases so that they meet your financial and tax goals. Tax planning also helps you plan for deductions. Estimated tax planning and tax saving are also part of an expert tax planning strategy. A tax professional has a wealth of knowledge that you can utilize to lower your taxes and create financial stability and growth.
This tax season we want to help you save money on your taxes. To learn more about how we work to provide our clients tax planning and how to lower your tax bill, sign up for our newsletter or reach out to one of our advisor’s today by getting started below. When looking at tax advice, it’s important to understand that 90 percent of what you’ll find on blogs (including this one) represent general information. As with any general rules of thumb, there are always exceptions and you might be that exception, so be sure to get some level of one-on-one review by an expert. To have one of our advisors connect with you to look at your specific situation, be sure to connect with us below by getting started.