Whether you’re a W-2 employee, a 1099 worker, or a business owner, you will need to pay taxes. Working with a tax professional can help ensure your taxes are prepared correctly — and you minimize your tax. However, you must still actively participate in the process and work closely with your tax preparer to ensure you obtain your eligible credits and deductions.
Here are five tax preparation tips to remember this tax season to help you avoid stress and any pitfalls that could arise:
1. Be Organized
Organization is key when preparing your taxes. You must have certain information to file your tax return, including documentation regarding your income, home and property, medical expenses, banking information, business expenses, charitable donations, and other deductions. Depending on your specific situation, you could have hundreds of receipts and pages of records. It’s best to keep these documents organized throughout the year to make things easier for yourself and your tax preparer when tax season arrives.
2. Be Complete
Before filing your return, review your return to make sure it is complete and correct even if someone else prepared the document for you. If your return has any errors in the information you provided, you are responsible for them — not your tax preparer. Mistakes can result in a rejection and ultimately, delay. If information on your tax return was incomplete, incorrect, or omitted from your tax return, you can file an amended return. However, amending your return can be time-consuming and require gathering more information and documentation.
3. Itemize Your Deductions
Itemized deductions are eligible expenses that a taxpayer can claim to decrease their taxable income — and it’s critical to understand whether electing to itemize your deductions makes sense for you. However, itemizing can be burdensome, and you must ensure your calculations are correct. While your tax preparer can help you to determine whether you should itemize or use the standard deductions, use Quickbooks or another accounting program to keep track of your expenses and streamline the process.
4. Understand What Deductions You Can Take
Running a business can be costly and it’s important to understand what deductions you can take on your return. Many business owners may not be aware that they can take immediate expense deductions for depreciable business equipment, rather than capitalize an asset. While certain machinery and equipment can be expensive for small business owners, taking a Section 179 deduction can lower your tax liability for the year it was purchased. Specifically, Section 179 it lets you deduct 100% of the property the first year it was put into service — instead of over a long period.
5. Don’t Try to Take Inappropriate Deductions
Tax deductions are available for many expenses and it is important not to overlook what deductions might be available. You should also know what deductions you should not take. While a tax advisor can help you figure out what tax breaks you can get, there are limits. For example, don’t take deductions for co-dependents or pass off lavish vacations and extravagant meals as business expenses when they were for personal purposes.
Contact an Experienced New York Tax Attorney
Tax matters can be complex and it’s essential to have an experienced tax attorney on your side who can help ensure you remain compliant with your state and federal tax obligations. Offering skillful representation to individual taxpayers, businesses, entrepreneurs, and corporations, Brinen & Associates represents clients for a wide variety of tax matters at both the state and federal levels. Call (212) 330-8151 or send us a message to learn more about how we can assist you.