Do you feel rushed and confused during tax season? This week on our Instagram Live, we hosted Mouri Khan to discuss the importance of having a mid-year tax check-up with your accountant, whether you are a business owner or not!
What are the benefits of having a mid-year tax check-up?
Being informed about beneficial tax strategies:
Working with an accountant mid-year can allow business owners to be aware of additional benefits they might be eligible for. For example, Mouri mentioned how some business owners could’ve claimed more than the $400 working from home tax claim if they worked with their accountant and see if they were eligible for more benefits. Having a mid-year tax check-up with your accountant can help business owners stay informed and prepare for the tax they might need to pay.
Identifying tax strategy differences:
Tax planning can be different for each individual depending on their life stage and situation which might impact how individuals can optimize their taxes. For example, married, divorced, and single individuals may have different tax planning strategies to optimize their taxes. A mid-year tax check-up can let accountants acknowledge any changes in your life and adjust your tax planning to meet your needs.
Do you struggle to go through all your documents during tax season? Having a mid-year tax check-up can let you organize your documents ahead of time and save any complications that may arise last minute during tax season.
More opportunity to Tax Plan:
Going through a full year of tax documents to create a strategy while understanding your personal situation might be challenging for accountants if it’s left to the deadline in April. As accountants get busier during tax season, they might not have the capacity to focus on your tax situation as they would during a mid-year check-up. Having a mid-year tax check-up can take off some pressure with the looming tax deadline and help them to zero in on your best opportunities to pay less tax.
Distributing your assets:
If you have investments or recently sold any of your investments, talking to your accountant as soon as possible is critical for your accountant to adjust your tax strategy accordingly. If you have a partner that might impact how your assets are distributed, an accountant can help you manage the ownership of assets in a way that will maximize your returns.
Leveraging your business income:
Many people have started side hustles during COVID for secondary income which has tax implications. For business owners who might be tempted to hide their cash income to lower their taxes, working with an accountant can help you find tax opportunities that might leverage your business while claiming your true business income for tax purposes.
Our tips for your mid-year tax check-up:
Take advantage of your deductibles:
Business owners who rent their living space can claim a part of their rent as an office expense which could’ve benefited them more than the $400 work-from-home tax claim. In addition to rental space, office furniture, business meals, phone bills, mileage, and all other business-related expenses can be deducted from the net income of the business which lowers the tax business owners might owe to the government.
Manage your business structure:
Depending on whether your sole proprietorship is limited or incorporated, your tax deadlines might be different. If your business is owned by multiple partners, the ownership structure of the business can also impact your taxes. Speaking to your accountant can help you understand your situation and plan your timeline accordingly. In addition, an accountant can project your expected annual profits and draw a tax plan accordingly, helping you to save for the tax you may owe during tax season.
Separate your personal and business income:
An accountant can also help you to separate your personal income from your business income. It might be common for some business owners to not pay themselves a salary as they run their business, which can both complicate their personal finances and business taxes. Overall, an accountant can both help you put your business and personal taxes and finances on track.
Understand your accounting costs:
Tax accountants charge per hour, and relying on them to be a bookkeeper in addition to being your tax accountant might lead to increased billing as the accountant will be spending more time on your taxes. Finding a separate bookkeeper with lower hourly rates might save your business some money and help your taxes.
We hope you enjoyed reading our blog post! Check the full live chat here. You can find our live chats and more of the latest financial news on our News Blog. Stay tuned to learn more tips on a new topic each week on our Instagram Live at 5 on Instagram! Aside from our live chats, we post daily financial updates on social media! Follow us on Linkedin, Twitter and Facebook and Instagram.