The holiday season has flown up on us and before we know it, it will be a new year. Soon after, comes tax season. Tax season can be overwhelming for both individual filers and business filers. Preparing now can reduce some of the stress associated with tax preparation season. These are some steps you can take now to prepare for the upcoming tax season.
Organize all of your documents
One of the most time consuming parts of tax season is gathering all of your needed documents to file. While you may not yet have your W2s and 1099s from employers, you can organize any other needed documents. These include documents that you will use to write off any expenses. If you purchase a new vehicle, house, or any business supplies during the year, you will need receipts in order to write them off. If you own a business, this retrieval process can be even more overwhelming and you will want to start gathering this information as soon as possible.
Choose an accounting firm
While some individuals and businesses choose to file their taxes alone, others prefer to have an accounting firm handle it. Although accounting firms cost money to work with, they can usually get you a bigger refund or a smaller tax payment. They are aware of expenses deductions that many are not. They can also file for extensions when you need more time to gather your necessary documents. One of the most important benefits of working with an accounting firm is the protection you receive during an audit.
Protection from audits
The IRS can audit any businesses tax return within three years of filing, and it can collect back taxes owed for up to 10 years. If you were audited from a tax return many years ago, it is unlikely that you even have those documents around anymore. Most accounting firms are aware of these time limits and keep customers records on file for the required time. If you are audited, they can handle the process for you. Additionally, audits are probably more common than you think. Individuals that filed a Schedule C (Profit or Loss from Business) with gross receipts of $25,000 to $100,000 were audited at a 1.9% rate in 2014, while those with gross receipts of $100,000 or more faced a 2.3% audit rate.
Save up for owed taxes
You can start your filing process at the beginning of January. Otherwise, tax forms and tax payments are due somewhere around April 15, depending on what day it falls on. If you wait until the last minute and find out that you owe, this could be a significant financial strain on some families and businesses. When you file early or let an accounting firm crunch your tax numbers early, you have more time to save up for the upcoming tax payment.
To research business tax requirements
Owning a business often requires a lot of research. Additionally, once tax time rolls around, you will find that there is even more research involved with business tax. For example, the R and D (research and development) tax credit can amount to up to 13.5 cents of credit for every qualified dollar. This could fall under another advantage for using a tax accounting firm
Tax season is closer than you realize. In the next month, you will begin receiving tax documents from any source of income from the last year. Right now is the time to begin organizing your tax documents and getting ready to file. If you are going to work with a tax professional, you will want to secure one as soon as possible, as they are going into their busiest season of the year.