Tax day is less that 25 days away. If you haven't filed yet, my guess is you need help and aren't expecting a return. Our friends at Laudie & Associates have sent some tips that might help. Lindsey Laudie is a tax accountant at Laudie & Associates in Pleasant Grove. If you haven't filed yet, or even if you have, there are some great tips included in this post.
While Laudie & Associates is not our tax service , we have used the same accountant for over 25 years and I can attest that getting a good accountant on your side, will not only save you a ton on money, but gives you the piece of mind that everything was filed correctly Even if you think you don't have any deductions or that the only deduction you have is a home, you may want to think again. There are 100's of hidden deductions in our tax laws, seeing a good account will often more than pay for itself.
Continue reading Lindsay's tax tips>>
Only two things are guaranteed in life: Death and Taxes. What a depressing statement! Who wants to think about death every time they think about taxes? Not me… no wonder taxes seem like such a daunting and depressing task with a statement like that!
Have you filed your taxes yet? Did you get the most bang for your buck, or were you bitterly disappointed with your lack of refund or amount of taxes due by April 15th? There are a lot of tips that can be given to help you save money on your taxes. Some are things you can do during tax season, and some are things you can do all year long.
Tip #1: Myth, It's cheaper to file at a big store:
How many of you are tired of the tax preparation commercials on the radio or on the television? How many of you have seen the “chain” companies (H&R Block, Jackson Hewitt, etc.) set up in your local Walmart or waving signs in front of their stores in silly costumes?
When choosing where to shop or what services to use, there is a mindset in the general public that bigger is cheaper – if you buy in bulk, or shop from a store that does (i.e. Walmart), then it will cost less per person.
This is not necessarily true, many small service companies are MUCH cheaper than the big chain stores that are popping up on every corner. The reasons may be that the big stores spend a lot on advertising, prime real estate space, and training many employees (most of the large companies have a two week training process for their employees – if you think that your return is always going to be seen by a CPA or degreed-accountant, you may be disappointed). Smaller companies have a lot less overhead and thus charge less.
What about these pre-packaged software programs that you can buy in the stores? Are they cheaper than hiring an accountant? Absolutely. There’s no doubt that they are. However, there are some of the misconceptions about them.
First of all, they advertise free e-filing. This is typically true – for the federal return. But what about the state return? State returns are often more confusing than the federal returns, yet you have to pay extra (in most cases) to get access to that return.
Also, they are only good for one year. There are changes to the tax system every year – rate changes, allowed deduction changes, threshold changes – every year is different, so a new program must be purchased each year.
Keep in mind when using these programs, there are deductions that may get missed, advice on changes you could make through the year to save more money next year, or simply peace of mind to know that you have done them right. Along with that peace of mind comes the knowledge that if you were ever audited, you would have a real person on your side to help you (and the person who helped you at the chain service is probably no longer employed there, as they were only a seasonal employee).
Tip #2: Save money by donating to a traditional IRA
For those of you wondering what you can do NOW to save money on THIS year’s tax return, one answer you may not get from your software is to donate to a traditional IRA (individual retirement account). While this tax saving strategy may not work for everyone, there are many people who would qualify for a reduction in their tax liability, or an increase in their tax refund, if they would donate to a traditional (not ROTH) IRA. Think of it this way – if you’re going to have to spend the money anyways to pay your taxes, wouldn’t you rather donate it to a savings account for you and save some money on your taxes than to just spend it all on taxes? To find out if this is an option available to you, I suggest you contact a tax accountant or CPA.
Tip #3: Save money by forming an S-corporation
In this struggling economy, more and more people are setting up small businesses, many of them being stay at home moms who are trying to earn a little extra money on the side. Etsy especially has grown exponentially with these home-crafted items. But how much is it costing you to carry on this business as a sole proprietor?
If you are making a moderate to substantial amount of money in a small business, it may be advantageous to you to elect to be taxed as an S-corporation. Why is this? Because you are paying a LOT of money in taxes unnecessarily if you don’t. Sole proprietors, or businesses with only one owner, report their earnings on schedule C of their personal tax returns. All money reported here is subject to self-employment tax, which is social security and medicare. There can be a substantial amount of tax savings to be had if you create to be taxed as an S-corporation and avoid a lot of these self-employment taxes. Again, if you think this could benefit you, you should talk to a tax accountant or CPA and they can help you understand your options, see what savings you may expect, and even set up the new corporation for you.
Tip #4: Save money by increasing your charitable donations
If you are itemizing your deductions on your tax return, the more deductions you can find the better (in most cases). One easy way to increase these deductions is through charitable donations. The most commonly forgotten donation that I have seen is those who donate to charity-run thrift stores, such as Deseret Industries or Goodwill. When you donate to these organizations, you are entitled to a deduction that is equal to the thrift store value of the item you donated. While that couch as was no use to you, the thrift store value you may $50-$100. The same goes for donating cars to a charitable organization, such as the Kidney Foundation. The easiest way to track this is to take one of the blank donation slips at the thrift stores and fill them out each time you drop something off, remembering that clothes are a couple dollars apiece at least so one bag of clothes could be a $50-$100 donation as well. Just fill in what you donated and the estimated thrift store value.
Another donation that is easy to forget is donating to your child’s school. When I attended high school, being part of the music program meant taking trips each year. These trips typically cost a couple hundred dollars. What we soon learned was that a donation could be made to the music program in my name and it would be applied toward my trip expenses. This was money we would have spent anyways but could also be deducted for tax purposes.
Tip #5: Save money by tracking your expenses all year long
The most frustrating thing to most people at tax time is tracking down all their deductions and expenses for a whole year. Organization is the key here. Not only does this save you frustration, but it could also save you money because you probably miss some expenses when you try to review a whole year’s worth of life in one sitting.
I would suggest getting a binder and being diligent about putting receipts in them. Put some of those notebook pencil holders in there for receipts, one for medical receipts, one for charitable donations, one for deductible bills (property tax, tax preparation services, etc.). Also, keep a piece of paper in the front where you can write questions or thoughts concerning tax matters to ask your accountant later. For example, if you turn your spare bedroom into a home office for your at-home business, make a note to ask your accountant how to do that. Or, if your friend tells you about donating to their IRA to save money on taxes and you want more information on that, make a note now so you don’t forget later.
Tax season does not have to be a stressful situation. In fact, with a little organization and a good accountant, it could be simply easy. Imagine going to your accountant with your binder of receipts and tax forms that you received in the mail and just handing it over. And then you’re done! No more stress, no more frustration, no worries about whether you missed something or didn’t fill something out correctly.
My final note is my shameless plug for Laudie & Associates. We are a small, family business and we are in the business of saving people money on taxes. If you have used a different service in the past, I would strongly urge you to contact us for a quote and see how much money we could save you in just your tax preparation. Then let us prepare your taxes and let us see how much money we can save you in your tax liability. All returns are reviewed by an accountant who has been preparing taxes for 20+ years. If you file your own taxes but have always stressed about whether it was done correctly or if you missed something, let us give you peace of mind for a fraction of the cost of other services. Contact us with any questions you might have about these and other tax tips! You can call me directly at (801) 367-8022.
Thank you Coupons4Utah.com for letting me share my tax tips to those who are looking to save money! As a fellow couponer and money-saver, I can appreciate the need to save every dollar we can for our families!
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