In just a few short weeks it will be April 18th, and the U.S. mail will be working at full tilt — making sure state and federal income tax returns are postmarked with that all-important “Apr 18” stamp.
If you haven’t yet completed your taxes, you’re, no doubt, looking for a time to get the job done – using either Form 1040 (aka “long form”,) 1040A (aka “short form”,) or Form 1040EZ (for single or joint filers with no dependents.)
In the coming weeks, when you get down to the business of crunching the numbers and filling in the blanks, keep these tips in mind – especially if you’re an entrepreneur or freelancer:
1) Know what you can deduct:
- Keep track of any charitable contributions – something that can be easily forgotten/ overlooked at tax time.
- Sales tax on expensive purchases such as a car or engagement ring can be tax deductible.
- If you pay for childcare throughout the week, you may have opportunities for deductions on that front.
- Be clear on business expenses that can be deducted – especially if you’re working out of your house. A percentage can be deducted for a designated home office as well as cell phone use. Your computer, printer, office supplies, and programs like QuickBooks can all be taken as deductions if they are legitimate business expenses. Keep track of any car mileage used for business as well. QuickBooks actually offers a handy business expense page that can help you stay on top of business expenditures accrued throughout the year.
- Track any car mileage used for business as well.
2) Pay estimated taxes:
- Beginning entrepreneurs/ freelancers can feel like an influx of cash is free and clear to go towards the monthly nut – when actually taxes are due!
- It’s particularly important for entrepreneurs/ freelancers, to pay taxes regularly throughout the year in the form of quarterly estimated taxes.
- Rather than be hit with a large tax bill in April, there is tremendous peace-of-mind knowing that you’re already all paid up by the time April rolls around.
- Paying estimated taxes quarterly can also mean avoiding penalties incurred for waiting until the last minute.
If you plan to do your own taxes, it helps to get as educated as possible, so as not to “leave money on the table.” On the other hand, hiring an accountant can be well worth the cost since a tax expert may be able to take a deeper dive, and find additional deductions you wouldn’t normally be aware of – saving you a lot of money in the end.
Whichever road you choose, I wish you luck getting your tax-related ducks in a row before April 18th. There is no better feeling than having deductions figured, final numbers crunched, signatures in place and the check in the mail. Happy returns to you this tax season!