The word “Taxes” brings up an image of endless loads of paperwork, meetings with tax consultants, and giving the money to the government, which is earned by hard work. As we know, it is near impossible to get rid of taxes by escaping it, but there is a way to cope with it and make some benefit out of that. And that way is none other than Tax Planning, i.e., planning or strategizing the taxes.
The phrase ‘the sooner, the better’ is perfect for this matter. It means that the sooner the Tax Planning starts, the better outcomes will come later in the year. It’s always advisable to start and implement tax planning early to get the best results and grab better opportunities to save the hard-earned money.
Having this in mind can help avoid and reduce the stress when the deadline to file the taxes will come near. The process of tax planning and making strategies for an individual or a company can be distributed into some manageable stages.
The IRS implemented and brought the TCJA (Tax Cuts and Jobs Act) into full effect from the last two working years. So, now individuals and companies must know about the tax process and its impact on their work. After the full implementation of TCJA, it has been seen that there is a loss of various listed deductions like home and office overheads, legal fees, and some business expenses like travel expenses.
Tax planning for 2020 and beyond
It is vital to have proper Tax Planning, but it’s a game-changer in the field of taxes and making the best out of it. It is different for each individual and business because it is based on the business and the goals. A big chunk of planning always includes knowing the tax deductions, quarterly taxes, which are due, and the most important thing is to avoid mistakes. So here are some essential points:
Arming with information
There are some known tax deductions, which include transport expenses, insurance, and rent. In the case of a new company or a start-up, business one can meet the requirements to receive a start-up cost deduction; in some cases, the owner might be eligible for inventory or business loan interest deductions. It is always beneficial arming with information to maximize the profit by reducing the taxes.
Not putting enough money.
The common mistake is widely seen as related to businesses that don’t put enough money with their bank to cover the due taxes. And This creates more stress in the form of imposed penalties resulting in paying extra money other than taxes. So, this is a significant point to have in mind while Tax Planning to skip the unnecessary problem.
Not Reflecting Trackable Income
Companies that operate as independent servicers must reflect their trackable income. If the company has done a business of $600 for a client, then they become obligated to give 1099. However, this number gets forwarded to the IRS, so the company must reflect it while filling the taxes. It is also advised not to lie about the numbers as the IRS tracks the whole thing and could take action in any false play.
Investment in various places
The great ways to receive the tax refund are investing in an IRA(individual retirement account) and Educational Saving Account or opening a Bank Saving account.
Business Income Deductions
For owners of businesses excluding C-corporations, the “Sec. 199A business income deduction” gives a 20% deduction on business income, which is qualified for that. But there is some elimination like investment-income, wage earnings, and guaranteed payments. However, it can be a significant chunk of the deduction for many businesses.
Do not miss deductions
There is a thin line between making the most of your deductions and going exorbitant, and that line can only be identified by doing effective Tax Planning. The outlying benefits related to work like travel, entertainment, and team outings are fully non-deductible expenses. But here are some deductions that should not be missed out:-
Costs related to start-ups: For business, start-ups claim up to $5000 could be made.
Deductions related to education: to claim an education deduction is not a compulsion to work only on a degree; it could be education related to the on-going business. In this case, the deduction is $10,000 paid after high school for educational purposes.
Business services: Whatever makes and helps to run a business like Wi-Fi expenses can be deducted.
Inventory related: Owners of either an individual or a business can claim deductions related to inventory, i.e., unpaid goods. But unluckily, this deduction doesn’t apply to services.
Loans and credit cards: Interests related to business purposes could be used as a deduction. visit – UBOS