The two major benefits of filing your taxes early are
1: You get your refund sooner
2: You can catch any mistakes
On the other hand, filing your taxes in April can cost you a little more money. Many accountants charge a “premuim” for filing so close to the due date.
Early Return Audit Speculation
Lastly, there are some who believe that the sooner you file your taxes, the more likely you are to be audited. The reason being that The IRS is expected to meet a certain quota of audits, or since there are less tax returns available for an audit your odds go up.
Neither of these theories have been proven and most in the industry would suggest filing as early as possible.
2) What receipts should I hold onto during the year?The purpose of holding onto receipts is to “write-off” or deduct those costs from your annual taxable income.
How you take your deduction is up to you:
You can either take the standard deduction, or you can itemize. (Listing out a lot of different deductions in the hopes that they add up to more than the standard deduction)
You should only save receipts for things like charitable donations if you’re itemizing. Otherwise, don’t worry about it.
Deductions Without Itemizing:
But there are some deductions you can take without itemizing. Those include:
- student loan interest
- supplies if you’re a teacher (though only up to $250)
- moving expenses
- tuition you’re currently paying
- IRA contributions
If you freelance, you don’t need to itemize to write your business-related expenses off. All those things will be listed out on your Schedule C. You can deduct as little as $5 for coffee with a business contact.
So save your receipts for:
- taxi fare to meetings
- client dinners
- other business necessities
- Take out a small loan from your bank
- Use your credit card
- Negotiate with the IRS (Yes, you can do this)
- Setup a payment plan with the IRS to pay in installments
Most of the time, the people who are audited, are those who claim suspiciously high deductions while earning little in taxable income.
However, if you are audited, stay calm. Most audits are relatively painless and take place through the mail. To be on the safe side, it’s recommended to hold onto all documentation supporting any deductions you take.
5) What can I deduct if I’m self-employed?If you are self-employed there are several important deductions you should consider:
1. Health Insurance Premiums. If you’re self-employed, you can deduct 100% of health insurance costs as an adjustment to your income. There are restrictions if you are able to get insurance through a spouse. So ask your accountant about your particular situation.
2. Retirement Contributions. SEP and SIMPLE retirement funding plans.
3. Tools and Equipment Used for Your Business. You are allowed to deduct the cost of necessary tools for your business. (Take note that items used longer than one year are deducted differently than items used for under one year.)
4. Vehicle Expenses. If you use the standard mileage rate, you can only deduct the mileage at a standard rate. For 2013, the rate is 56.5 cents.
You can’t deduct:
- Actual vehicle expenses
- Lease payments
- Vehicle registration fees
Instead, you can deduct:
- Lease payments
- Registration fees
- Garage rental
5. Cell Phone Expenses. You can deduct cell phone expenses from business use only.
6. Home Office. You can deduct the cost of your “office” at home as long as the office is used only for business purposes.
Mike McVay is a Pensacola Florida Accuntant serving all 50-states. Call today for a FREE consultation. www.VirtualBookkeepersUSA.com can help you navigate this years complicated tax filing. 850-725-5696