By Dave Horwedel, EA
Most people have now filed their 2022 taxes, and if not, they are officially late.
There may be a few exceptions to being late. For example:
- If you are in a federally declared disaster area or
- If you are on a non-calendar year basis
If you filed your taxes and were unhappy with the experience, now is the opportunity to make next year better.
Let’s face it! For many people, filing taxes is one of their worst experiences of the year.
Now would be an excellent time to call Torchlight Tax for a free consultation. You can call us at 1 877-758-7797 toll free or email us at email@example.com.
There is still time left in 2023 to take actions that could lower your 2023 tax bill.
It is an EXCELLENT time to get your tax questions answered.
It is also a good time to take steps to do the bookkeeping and accounting that are necessary for smooth 2023 tax filing. These are especially important for any sort of business.
It is also a good time to review other strategies to protect your assets or save tax dollars such as properly setting up entities such as partnerships, LLCs, S and C corporations and trusts.
Asset Protection is often omitted, and if you have significant assets or a profitable business it can be a big mistake.
Asset Protection is not a big deal until you are hit with a lawsuit or some other disaster and then it may be too late.
Sometimes a change in entity from one business type to another can have a significant impact on the amount of tax owed. Some examples of entities are sole proprietors, partnerships, LLCs, S-corporations, C-corporations, and trusts.
Putting in basic actions can also save you a lot of time, money, and upset during tax season.
Here Are Six Tips to Save You Time and Money on Next Year’s Taxes:
- Keep Tax Records Safe
Place your last year’s tax return and supporting records and documents in a safe place. If you ever need your tax return or records, it will be easy for you to get them. If you are familiar with computer systems, you can save or scan your records into the computer and get rid of needless paper. Make sure the records are legible in scanned form and are properly backed up.
- Take Action When Life Changes Occur
Some life events such as a change in marital status or the birth of a child can change the amount of tax you pay. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer.
- Report Changes in Circumstances to the Health Insurance Marketplace
If you have enrolled for health coverage through the Health Insurance Marketplace and receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or family size, to the Affordable Care Act Marketplace.
Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.
However, it is important to notify the Marketplace about changes in circumstances to allow the Marketplace to adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit.
If you did get health insurance through the Marketplace, and your income increased substantially during the year, you may have to pay back much of the premium tax credit that you received.
If you will file form 1095-A Health Insurance Marketplace Statement, be sure to keep this. If this form is not provided to us when we do your taxes, you will wind up getting your tax return rejected or receive an IRS Letter.
- Choose Your Tax Professional Wisely
There are three types of tax professionals that the IRS recommends and trusts. These three types of tax professionals are Enrolled Agents, CPAs, and Tax Attorneys
They can be found by name and zip code on the IRS website.
The Tax Attorney is not a specific diploma or license that is issued. However, an attorney who is also approved by the IRS to file tax returns will show up on the list of trusted tax professionals on the IRS website.
An Enrolled Agent (EA) is the highest federal tax credential. Any taxpayer can sign an IRS Power of Attorney form 2848 and an EA can represent them before the IRS, just like a Tax Attorney can.
The CPA is the highest state credential.
- Consider Itemizing
If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. Review what is deductible on Schedule A or get with an Enrolled Agent to help you sort it out.
Also, know that any deductions you create that when totaled, fall below the standard deduction give you no tax benefit.
For example, let’s say you plan a $5000 charitable deduction at the end of every year to your church. This will bring your total itemized deductions close to but slightly below your standard deduction. You will get no tax benefit from this donation, as it is below the standard deduction. You can take one or the other.
This is fine in one sense, as you wanted to make the donation to help your church, but why not make two donations of $10 000 every other year? This allows you to itemize your deductions every other year, helping you save on taxes.
- Keep your eye out for an IRS Identity Protection PIN in the mail.
When a person is the victim of identity theft, they can prevent a criminal from filing their tax return falsely and perhaps getting a refund by requesting a six digit Identity Protection Personal Identification Number from the IRS.
The IRS will mail you a six digit code every year that is this ID Protection PIN. Without this code, your taxes cannot be filed electronically.
This is good protection, but if you receive this and do not tell us, we will be unable to file your tax return electronically. It will be rejected.
If you learn to think in terms of deductions, credits, and taxes, you can save your future tax dollars. Now is the time to do so.
Tax pros are usually quite happy to assist you on tax planning in the summer. Somehow, it does not seem so well on the last day of filing.
For help with tax planning, or any other tax or tax-related help you may need, contact Torchlight Tax and Financial Solutions today at 1-877-758-7797.