Tax filing is one of the most dreaded chores in the life of a business owner.
The tax season comes with a lot of mental and physical pressure – whether it is the time-consuming nature of paperwork or the stress-inducing deadlines and emphasis on data accuracy.
And because it is mandatory, 85 million Americans end up seeking professional help.
Now, tax filing can also impact your business costs as an average individual spends $250 annually to file their tax returns.
However, there are a few ways to minimize your tax liability, and ultimately, your overall business cost.
Let’s look at the six affordable and practical tax filing solutions.
Key Takeaways
- If you earn $73,000 or less, you can benefit from the Free File program offered by the IRS for free tax filing support.
- An average person spends 13 hours filing out Form 1040.
- By outsourcing your tax preparation, you can enjoy year-round services, save money and time, and have peace of mind.
- Leverage all tax deductions and tax credits to reduce your tax liability.
Tax filing for free – Is it possible?
Many businesses find the tax filing process too complicated, compelling them to outsource their preparation.
Now be aware and don’t get scammed either by paying too much or trusting the wrong service provider who fails to understand their business requirements, ending up filing inaccurate tax returns.
Now you may wonder if there’s a solution to this.
Well, there is a free tax filing solution for individuals earning $73,000 or less in a year.
Basically, the IRS has a program known as Free File for individuals earning $73,000 or less through which they can access free tax preparatory software.
The only thing you are required to do is double-check your income and statement eligibility.
In addition to this, the IRS has another free tax filing program called Volunteer Income Tax Assistance for individuals earning less than $60,000 or less, or people with disabilities and limited English proficiency.
Through this program, you can avail free in-person tax preparatory solutions.
If you are 60 years of age or above, you can also benefit from the Tax Counseling for Elderly program.
Now there are a few additional tips that you should be mindful of.
- Make sure you only use tax software listed on the IRS website.
- Compile and organize your income statements like W-2s and 1099s forms.
Doing your own taxes vs. hiring a professional
The tax filing is quite daunting for business owners due to its complicated structure.
Add in the legal intricacies and the time-consuming nature of filing tax process and you are already overwhelmed.
But here’s the thing. You don’t have to do your taxes on your own.
And while it may seem like an additional business cost, outsourcing tax filing can actually save you tons of time and money.
Let’s look at some of the advantages of outsourcing tax filing for businesses.
1. You save money
There is a misconception that outsourcing tax services can be costly.
This is a myth because, in reality, a professional can educate you on the different tax deductions and tax credits you’re eligible for.
You can save more money leveraging various tax deductions and credits than the actual service cost.
2. You can save time
The IRS reports that an individual spends nearly 13 hours to fill out Form 1040.
Now imagine how costly these hours would be for a business owner. They could use this time to focus on running their business.
3. You can enjoy peace of mind
One thing is true – outsourcing this responsibility gives you peace of mind.
The ease you feel when you know that a tax professional has controlled every aspect of tax filing cannot be undermined.
4. Year-round services
Tax preparation is not simply one month before the deadline.
On the contrary, tax preparation should be done throughout the year.
And when you outsource this responsibility, you get support and guidance from tax professionals year-round.
They provide tax-saving solutions and are extremely proactive with your tax planning.
6 practical tips for tax filing
Tax filing can be frustrating and exhausting for some business owners.
However, if you are proactive in your tax planning and you seek affordable tax support, you can reduce some of that burden.
Let’s look at six practical tips for tax filing.
1. Check the IRS list of documents on their website
What are the documents that you need to file for tax returns? This is the first question that comes to your mind when preparing for tax filing.
The IRS has a list of documents you need for accurate tax filing. When you have a list in your hands, it makes things simpler.
Now, you can get the same list from tax professionals.
Common examples include W2 forms, student loan interest forms, bank interest forms, and any other receipts to apply for tax deductions or credit.
2. Leverage tax credits and deductions
Tax deductions and tax credits are benefits that help you save money.
While a tax credit lowers your tax bill, a tax deduction reduces the total amount of income you pay taxes on.
Find your eligibility on the IRS website.
And if you use tax preparation software, you can find out your eligible tax deductions and credits via prompt questions.
3. File for a tax extension
Many businesses worry that they will have to pay extra if they fail to meet deadlines. While it’s true, there’s a practical solution to this situation.
You could fail to prepare and file for taxes by April 15th for whatever reason, but you can file for an extension to avoid penalties.
This way, your deadline will get pushed to mid-October.
But make sure you estimate and pay any amount that you think you owe to the IRS before this deadline or be ready for penalties.
4. Plan ahead for refunds
Have you ever wondered what really went wrong with your tax filing the year before? Ask yourself the following questions:
- Did you get a refund?
- Did you owe a lot of money to the IRS?
These are important questions as they will help you figure out what went wrong and how you can avoid making the same mistake.
5. Choose the right tax preparatory service for your business
The best thing you can do for accurate and affordable tax filing is to find a tax service that meets your needs.
Outsource to a service provider knows the latest accounting principles and tax regulations.
They should have experience with your industry and understand the needs of your business type and size.
6. Don’t neglect disaster loss
Any loss declared by the federal government is an itemized deduction.
While you can’t deduct just about any loss because identity theft is common, the federally declared disaster is unquestionable.
The loss should be related to your home, machine, or any household item of value and have insurance.
For example, you can deduct Schedule A of Form 1040 for the year before the disaster.
You should check if the casualty loss is greater than your actual income. It helps you see if you qualify for net operating loss.
2 benefits of filing tax returns early
1. You can make small and big adjustments
Adopt a proactive approach and don’t wait around for others to tell you what to do.
Waiting around for others to guide you will only result in inaccurate and late tax filing.
Go to the IRS website and find out which documents you need.
You can ask a tax professional should you fail to understand the technicalities.
The earlier you start tax preparation, the better.
Also, if you delay the entire filing process till the last minute, you are more likely to make mistakes. And here, every mistake comes with a cost.
What is important to realize here is that by being proactive you buy yourself more time to make adjustments and fix your mistakes.
Here are some of the common mistakes if you delay the process.
- Calculation errors
- Forgetting to claim tax credits or tax deductions
- Inaccurate income reporting
2. You can reduce tax liability
Pay your taxes on time and leverage every tax deduction to reduce your tax liability.
It’s really simple. The faster you pay the money you owe, the more quickly you are likely to reduce your tax liability.
This includes the stress that comes along with tax preparation.
The bottom line
Tax filing is a grueling process for businesses but a proactive approach helps you reduce your tax liability and save money.
While you can save time and money by leveraging tax deductions and tax credits, make sure you plan ahead and choose the right tax service provider.
It ensures you keep peace of mind and avoid tax penalties.
Ledger Labs provides tax preparatory and tax filing services to businesses across industries and sizes.
We have 12+ years of experience and know the latest tax regulations.
Book an appointment with us today to find out how we can help you.
