Preparing taxes is one of the most important tasks that should be done well. The fact is that the IRS does not take any errors lightly. In order to avoid a hefty penalty, you should not only file the taxes within the due date but also make sure that the return file is free of any errors.
To assist you with this year’s tax preparation in Lake Nona, FL, we have prepared for you a list of tips that will prove invaluable in filing taxes. Some of the tips regarding tax preparation in Lake Nona, FL will ensure timely filing of taxes while others will allow you to save money on taxes.
1. Keep the Paperwork Organized
You should organize all the paperwork before preparing the returns. File receipts, charitable donations, tax forms, and other documents. Consider keeping the documents in a three-ring binder for easy access when it comes to preparing the tax file.
2. Increase Your Contributions
A great way to save on taxes is by boosting your contributions. Consider making contributions to health savings or IRA account up to the due date for the 2018 tax returns, which is April 17. However, it’s important to file the tax return early. This is essential to ensure that the refunds are not delayed.
This is an effective money-saving move for taxpayers who have not made contributions up to the limit for IRA $5,500 ($6,500 for people above 50). The amount of tax saved using this strategy will be according to the income tax rate. Individuals who are in the 25 percent bracket and invest up to the maximum contribution limit can save up to $1,375.
3. Claim Business Tax Exemptions
Individuals working from home can claim tax exemptions for work-related home expenses. Generally, you can deduct phone expenses, traveling expenses, and entertainment expenses from business taxable income.
In order to find out whether you are eligible for tax exemption, you should fulfill two important criteria.
- Use a portion of the house for business purposes
- Office must be your place of residence
If the above two conditions are fulfilled, you can claim tax exemption. This strategy of tax preparation in Lake Nona, FL will result in savings of hundreds of dollars in taxes.
The portion of the house that is allocated for business purposes should be exclusively used for that purpose. You cannot claim deductions if you use the space both for personal and business purposes.
Another requirement is that the home from where you work should be your principal place of residence. You cannot claim dedication for expenses outside the house. For instance, if you carry on your business in a five-star hotel or a cafe, you can’t claim a deduction for the expenses.
An important point to note regarding tax preparation in Lake Nona, FL is that you can deduct expenses if you carry out only meetings with clients, patients, and customers in the home. Even if your business is located elsewhere, you can claim deductions in this situation for space that is used particularly for business meetings.
In addition, you can deduct expenses for a free-standing structure like your garage, studio, or even a barn that is used for business meetings. The structure need not be your primary office location. You can deduct expenses allocated to space. Keep in mind that the deductions are based on the portion of a home office that is dedicated to business use. You can contact a professional accountant for tax preparation in Lake Nona, FL to determine the percentage of your home used for business.
4. Know the Requirements for Claiming Business Tax Deduction
Your tax accountant will also tell you about the methods that you can use to deduct business expenses. The simple method to determine to calculate home office deduction is to multiply the office square footage by a prescribed rate. You can claim a deduction of up to 91 square meters (300 square feet). Your accountant that you hire for tax preparation in Lake Nona, FL will tell you about the exact rate that is applicable in your case.
Another option is to calculate the actual home expenses. You should contact a professional CPA accountant for tax preparation in Lake Nona, FL to know the exact expenses that you can deduct from your income tax. Once you calculate the expenses, you should next multiply this figure by the percentage of home that is dedicated to business.
One last thing that you should know about the requirements when it comes to tax preparation in Lake Nona, FL is that employees of a company who use part of the home for business purposes can deduct expenses from their personal income. In this situation, apart from the criteria that have been mentioned above, the following requirements should also be met:
- The business space must have been used for the convenience of the employer
- The space should not be rented to the employer
In case you charge a rent for the use of space for office use, you cannot deduct expenses when it comes to tax preparation in Lake Nona, FL.
5. Reconcile Your Bank Statement
An important thing to remember when it comes to tax preparation in Lake Nona, FL is to reconcile the bank account. Bank reconciliation simply involves tallying the given amount in the bank statement with the personal ledger. The two amounts should tally. In case the amount of the two accounts don’t match, you should dig further to know the reasons.
The most probable reasons for a mismatch in the bank accounts include uncleaned checks and bank charges. You should make an appropriate entry for any discrepancy found when reconciling the accounts. You should get the help from an accountant for tax preparation in Lake Nona, FL to ensure that the accounts are reconciled.
6. Take a Look at Quarterly Tax Payments
Do you make quarterly tax payments? If so, you should determine the payments. Taking stock of quarterly payments is important when it comes to tax preparation in Lake Nona, FL. Make sure that you take stock of the payments and tally them with the end of year figure. This will help you determine how much you owe in taxes and also the refund you might get this tax year. The tax accountant that you hire for tax preparation in Lake Nona, FL will help you make accurate calculations regarding end-of-year figures.
7. Complete W9s
In case you use contract labor, you need to complete form W9 for each individual you have paid more than $600 during the year. The form should ideally be issued at the start of the tax year. However, if you forgot to issue the form, you can still do it when it’s time for tax preparation in Lake Nona, FL at the end of the fiscal year.
Also, you should issue 1099 forms that the contractors can use when filing income tax returns. Your tax accountant that you hire for tax preparation in Lake Nona, FL will provide you with more information regarding the tax forms that should be issued to contractors.
8. File the Right Tax Forms
Different types of business users need to file different tax forms. Knowing which form you need to file is important when it comes to tax preparation in Lake Nona, FL. Your accountant will tell you the exact forms that you should fill for tax preparation in Lake Nona, FL.
One special consideration regarding tax preparation in Lake Nona, FL is about Uber and other ride-sharing service drivers. IRS considers them independent contractors. The tax form that you should file is the T2125, Statement of Business or Professional Activities. For personal income other than that earned as an independent contractor for ride-sharing services, you should file Form T1 General and the Schedule 1 of the tax return.
You can find out about the total income made as an Uber or Lyft driver on your Anal Tax Summary form that you receive from the ride-sharing company. From this income, you should deduct business expenses. You should gather bills, receipts, and statements to know about the deductible expenses. Common expenses that you can deduct include the following.
- Fuel expense
- Repairs charges
- Maintenance expenses (brake fluid, windshield washer fluid, antifreeze)
- Cost of balancing and installing tires
- Lease payments
- A percentage of phone expenses
- Car washes
For calculating fuel expenses, you should not the total kilometers driven. This information can be found in the annual tax summary paper provided by the company. The total mileage driven as a driver should be multiplied by the fuel charges to determine how much fuel expenses you incurred during a tax year.
9. Avoid Making Common Mistakes
Make sure that you avoid any mistakes when filing taxes. The most common mistakes that people make was mixing business and personal expenses.
Misclassifying workers is probably the most common mistake people make regarding tax preparation in Lake Nona, FL. You should talk with your tax accountant to find out whether the person you hired for work is an independent contractor or an employee. Different tax rules regarding the two types of employees.
A rule of thumb that can help you determine whether the work you have hired is an employee or an independent contractor is to find out whether you can operate a day-to-day business without the help of the worker. If the answer is yes, then the worker is most probably an independent contractor. On the other hand, if you can’t operate the business without the help of the worker, then the worker must be an employee.
Another issue that comes up when it comes to tax preparation in Lake Nona, FL is regarding online sales. Many people wrongfully believe that they don’t have to pay any taxes from sales on Amazon, eBay, or iTunes. They fall into this trap on the logical assumption that since they don’t pay any taxes on online purchases they don’t need to collect tax from customers. The reality is that if they sell to customers in the state where they have a nexus or business location, then they have to collect and submit taxes.
The issue of taxes on online sales will become more complex with the upcoming Marketplace Fairness Act. The proposed legislation if adopted will allow states to collect taxes even if retailers have no physical location in the state. As a result, non-exempted online retailers will have to know the right local sales tax for a different customer located in the state where the tax law is applicable. Hiring a CPA accountant to handle this matter will simplify the matter and ensure that you don’t make any mistake when filing taxes.
We have mentioned important tips that can help you when it comes to tax preparation in Lake Nona, FL. You should select a tax professional for tax preparation in Lake Nona, FL carefully. Make sure that the tax professional has the required experience in handling businesses similar to yours.
Hiring a professional tax accountant will ensure that there are no serious mistakes that could result in a penalty. In addition, you will know about the tax deductions that will result in savings for you. Letting a tax accountant handle all tax-related matters will allow you to focus on your business instead of getting bogged down with taxation matters. In short, hiring a professional tax accountant will result in maximum benefit for your business in terms of greater savings, reduced penalties, and more focus on strategic aspects.