Filing your taxes is always the one thing that seems to sneak up on me. Be prepared to meet the April 15 deadline with these tips.
History behind April 15
If you’re a fan of the Constitution, you’ll know the fun facts surrounding the imposition of the anniversary to file your taxes. Some people say it came with the addition of the 16th amendment. Others say it came with a 1913 act Congress passed. Read more about the schools of thought here. The original date to file was March 1, and subsequent acts pushed the filing date forward.
Today, Americans file their taxes on April 15. Should you file after that date, you could be subject to fines.
2020 Impact on Taxes
As we walk in to 2021, we all want to leave 2020 behind. However, there are a few lingering sentiments we must deal with. There has been question as to whether or not stimulus checks will be taxed as income, and my research shows it won’t. That information is according to the IRS and Experian, one of the credit reporting agencies.
Taxes – Generally Speaking
There are several things worth noting prior to going in to getting your taxes done. Have you done any large amount, charitable giving in the last year? Do you have any children? Did you receive an inheritance, either cash or real estate?
Keeping a record of your fiscal year is not only wise, but it will save you time in preparing your taxes. If you haven’t already, begin drumming up receipts for things like charitable giving or work related expenses. If you aren’t sure about whether or not you can write them off on your taxes, work with a tax professional in your area that can help you answer your questions.
What does it mean to “write something off on your taxes”? That means you can count that as a credit toward your income, making the entire amount you’re due to pay taxes on less. For instance, for my small business, my equipment to do my job is an expense to me, and I’m able to write off a portion of that every year. I take the expenses I currently have in my business and subtract them from my income. The difference is what I pay taxes on.
What about dependents? A dependent is someone who lives in your home and depends on you financially. In most cases, this is a child. In some cases, it’s a sibling or a step child. This can pose just a few questions, because there are some cases where your dependent should be filing taxes. To avoid headache, the IRS has more information about what’s considered a dependent.
Small Business Taxes
The majority of my work has been what the state of Arkansas considers contract labor. That means after my annual income exceeds $600, I have to start paying taxes on my income. I also get to write off my expenses. As a small business owner, are you prepared for this tax season?
Your check list could look like keeping a monthly log of your income and calculating the estimated percentage you’ll have to pay in taxes. Some tax professionals recommend anywhere from 15 to 20 percent. Be sure you subtract your expenses and other items you can write off – like equipment – so you aren’t over paying in taxes.
There are also caveats if you hire someone like me out. Did you know that as a small business owner, contract labor is an expense you can write off on your taxes? Don’t leave that money on the table!
There are other professions that require a particular type of help when it comes to preparing taxes. Be sure to work within your circle of influence and work with a seasoned professional who is going to make sure you aren’t over paying in taxes and you’re due what you overpaid already.
How do you prepare for tax season?
This time of year can be stressful, but I know the work I put in every month keeping my records straight only prepares me for success. And afterward, my husband and I celebrate our diligence by going out to lunch!
Did you like this post? Check out these other great posts!