Updated: Jun 17, 2021
Our year is coming to a close, and with that, tax season! We hope that we can offer some ideas on how you can best prepare for this eventuality, as well as putting your best foot forward for the new decade:
Check your Tax Withholding
Last year many filers were unpleasantly surprised when they filed their taxes and realized that due to the tax law changes, their withholding tax rates were not adequate to cover their final tax bill. Many received a smaller refund than expected, while others unexpectedly owed tax.
So, before year-end, take a look at your current withholding rates and make sure you have designated enough to be withheld to alleviate this issue for 2019. If you find that you have been
under-withholding, you can make a change now by submitting a new W-4 to your employer and/or request that an additional amount be withheld from your last few December paychecks.
Understand Home Office Deductions
As more and more of the work force become virtual, and work from home, the tax implications of this are critical to understand. The home office deduction is a very lucrative way for small business owners to reduce their tax burden. However, just because you do work from home doesn't automatically qualify you for these deductions.
Check out IRS form 8829 to see if you qualify. Another related topic for small businesses is the mileage deduction, and how to claim this deduction on your tax return. Please see this article for more information: https://www.freshbooks.com/blog/claim-mileage-on-taxes.
Expect the Unexpected
Things come up; we all know this. Double check all of your documents and files are in order. You never know when there might be a crisis of some sort that needs immediate attention. Going into tax season, if you are well prepared and equipped to deal with any curveballs that may come your way, your tax prep and filing experience will be more positive. This might mean some double checking in the short term, but the time you take for that may help you avert a crisis in the long term.
CPN & Associates LLC is a Business Consulting Firm offering strategic business reviews, analytical financial reviews, operational management, and many other small business services.