Even though we have taxes due every year, we always have some questions. The tax code changes frequently, and it’s extremely complex. Here are some of the most common tax and tax season FAQs. How Can I Lower My Tax Bill? Far and away, the biggest tax questions are always some variants of “How can I lower my taxes?” and “What deductions am I eligible for?” Tax deductions and credits are the most common way to reduce your tax obligation, whether you are doing your individual or business taxes. The hard part about this question is that it’s different for everyone. A lot of your tax information comes in the form of Information Returns, the forms like 1099s, 1098s, W-2s, and others that show you what your financial activity looked like throughout the tax year. These Information Returns help you fill out the tax forms you need in order to take advantage of many of these deductions and tax credits. eFile360’s top-tier e-filing services offer you a great solution for filling out and storing these forms. What Are This Year’s Tax Changes? Every year, the IRS makes adjustments to the tax laws, processes, and procedures based on the latest government regulations, technology changes, and overall performance during the last tax season. This tax question is one that people are worried about all the time. American taxes are like a high-level puzzle: you have to put all the pieces together, solve the equations, and hopefully submit the right answers. But if the rules have changed, you may be making inadvertent mistakes. The IRS website, specifically their Newsroom, is a great way to stay up-to-date on any and all changes that are coming up during the next tax season. What’s the Difference: W-2 vs. 1099-NEC? The 1099-NEC is one of the newest Information Return forms to be (re)instated. These forms are used to calculate non-employee compensation, including freelancer and independent contractor work. W-2s are given to employees of a business early on during tax …
Real Estate Tax Tips: Buying, Selling, & Renovating
The 2022 housing market is the hottest in several years, and that means people are throwing themselves into it with the hopes of making a quick buck or reducing their tax burdens. Before you rush into it, here are some real estate tax tips for buying, selling, and renovating your home. Tax Tips for Buying Your Home There are some great ways to save some money on real estate tax items if you know where to look. The first is on your 1098 – this is provided by your mortgage lender or servicer. It documents how much you paid in mortgage interest over the tax year, and you should get one if that interest totals more than $600. In order to claim a deduction for mortgage interest, you must itemize. You’ll use Schedule A (Form 1040) as well as the standard 1040. This form is used if you aren’t renting the home (you’ll use Schedule E instead) or running a business out of it (you’ll use Schedule C). And if you’re buying a house soon, or you just bought one, you can deduct prepaid mortgage interest (points). Here’s another tax tip: if your adjusted gross income is less than $100,000, you can deduct 100% of your mortgage insurance premiums as well. You should also remember that you can deduct state and local property taxes, with a limit of $10,000. However, there are several fees that aren’t deductible when it comes to real estate tax and the purchase of a home, including fees paid at or before closing (title insurance, appraisal, surveys, etc.), property insurance, depreciation, and utility payments. Tax Tips for Selling Your Home When it comes to selling your house, here are a few important tips and information. First, taxpayers who are single filers can exclude up to $250,000 of capital gains on the profits made from the sale of their home, and married couples can exclude up to $500,000. But there are some stipulations: the sellers must have owned and used the home as a primary residence for 2 of the last 5 years before the sale. The two years do …
Continue Reading about Real Estate Tax Tips: Buying, Selling, & Renovating →
Lower Your Business Taxes: 5 Strategies That Actually Work
Gas prices and inflation are high and supply chain issues are driving the prices up for businesses everywhere. That means small businesses in particular are looking for ways to cut costs. And that means now is a perfect time to employ some proven strategies to lower your business taxes. Leveraging ‘Expense’ vs. ‘Depreciate’ There are many cases where you may be allowed to choose to claim business expenses as either expense (deductions) or depreciation. Your business taxes should reflect your business in its entirety, and that might mean spending some more time on those taxes or talking at length with your accounting department, CPA, or other tax services provider. When you are considering whether to expense or depreciate the assets or equipment you just bought, there are several things to think about. This mostly applies to larger purchases. For example, if you bought some used office equipment for your business and it cost you $200-300, depreciating that over a few years isn’t going to help much. But if you just spent thousands of dollars on a company vehicle, or you purchased new machinery or equipment because you are experiencing (and expect to continue experiencing) substantial growth, depreciating those assets over a few years rather than giving yourself one big year of deductions could actually be more beneficial, especially if the growth means you’ll end up moving into a higher tax bracket. Expanding Employee Benefits It may seem counterintuitive that expanding the employee benefits your business offers could result in a lower tax bill, but there are several reasons why this is possible. Keep in mind that every business’s setup is different, so it’s important to weigh the costs and viability of adding benefits to your employee’s current contract or incentives package. There are some tax laws that have taken reimbursement incentives away from individuals, but they can still be claimed on business taxes. By transferring that reimbursement to …
Continue Reading about Lower Your Business Taxes: 5 Strategies That Actually Work →
Estimated Tax Payments: What Entrepreneurs Need to Know
Estimated tax payments can be confusing. It’s easy to say, “I’d rather just pay them all at once, so I’ll wait until tax time next year to do them.” But missing those payments can be costly for your business, and no small business owner has time for extra expenses right now. What Are Estimated Tax Payments and Who Pays Them? Estimated tax payments are something every small business and self-employed individual has to worry about. Because income taxes and others are not automatically taken out of these types of employees’ paychecks, the amounts that the business or individual will need to pay is estimated, and then paid quarterly throughout the year. Typically, sole proprietors, partners, and S corporation shareholders are responsible for paying estimated tax, if they expect to owe tax of more than $1,000 (or $500 for corporations) when their return is filed. This includes any income that isn’t subject to withholding tax, like interest, dividends, capital gains, business earnings, and more. Estimated Tax payments are made quarterly, on or around the 15th of January, April, June, and September of each year. Here are the 2022 due dates: April 18, 2022 June 15, 2022 September 15, 2022 January 17, 2023: Please note that you do not have to make the last January payment if you file your 2022 tax return by January 31, 2023, and you pay the entire balance due with your return, according to IRS Instructions. You do not have to pay estimated tax if you meet all three of the conditions below: You had no tax liability for the prior year You were a U.S. citizen or resident for the whole year Your prior tax year covered a 12-month period Why Should I Keep Up with Estimated Tax Payments? The taxes that are applicable to this rule include things like federal income tax (ranging anywhere from 10 to 37%), state and municipal tax (typically between 0 and 14%), and self-employment tax. Many businesses lose their way during this part of the …
Continue Reading about Estimated Tax Payments: What Entrepreneurs Need to Know →