Are you self-employed? If so, you may not realize that you should start working on your income taxes much earlier than many of your wage-earning friends. Why? Here are five key reasons to get a jump-start on tax preparation even during summer and fall.
1. You Should Check on Quarterlies.
Quarterly estimated tax payments are calculated based on prior and current year income to cover your tax bill and are sent at least quarterly. It's hard for many self-employed persons to make these payments on a timely basis. And estimations may not be accurate as the year's activities progress. For both reasons, you should meet with your tax preparer during the year to perform a "checkup" of quarterly payments.
2. You Have Time to Plan.
If for any reason, your tax burden has changed during the year — or if you haven't made enough payments — you need time to plan. The earlier you are clued into any possible over- or underpayment of taxes, the more you can prepare your finances. In addition to making extra payments, you may opt to change the timing of purchases, seek out more or less work in the current year, or make different tax-advantaged contributions.
3. You Can Gather Documentation.
Businesses and self-employed taxpayers often need much more paperwork to file their taxes than someone with just one Form W-2. When you start working on this project early, you won't end up rushing around in the spring trying to compile an entire year's worth of tax information.
4. You Get Help With Business Decisions.
Different business and financial decisions have different impacts on your tax bill. As you discuss the current year's plans — and next year's plans — with a tax pro, they can help you understand these impacts. For instance, if you are thinking about buying a large asset, they can talk about depreciation options to maximize tax deductions. Hiring a subcontractor? The tax expert can explain your reporting obligations and how to avoid running afoul of IRS rules.
5. You Stay Abreast of Changes.
The tax laws change every year, but few ordinary taxpayers are aware of this. When you stay in touch with a tax professional, they can alert you to things you may need to know. Are any tax credits you receive expiring? Have limits or thresholds been raised? Have the rules for claiming a benefit changed? This information could save you significant money when you can plan ahead.
In which of these areas could you use more assistance? No matter what your concerns about taxes and your bottom line, meeting with a tax prep professional can help assuage them. Learn more by making an appointment today.