How to Determine Your Tax Planning Strategy

If you plan on filing your return without the assistance of an accountant, deciding a tax planning strategy at the beginning of the year will make tax season less stressful. When you know your plan, you can track your tax obligation on a daily basis, reducing the amount of paperwork required at the end of the tax year. Ask yourself a few simple questions to get started. Then, create a system that will help you best track your obligation throughout the year.

Questions to Ask

You should ask yourself one simple question when you get started on deciding your strategy: what is the most important thing about my taxes? If the most important thing to you is paying the lowest amount possible, you will have a different strategy from a person who feels the most important thing is avoiding an audit at all costs. Small business tax accounting is very nuanced with a lot of gray areas. The size of your deduction is largely up to you, and it is entirely legal to file for a number of deductions that may not have been "necessary" in your mind. However, in terms of protection in the face of an audit, a stricter interpretation of the laws will be necessary.

Items to Record

Start by recording your expenses on a daily basis. This includes any cost that could be remotely associated with your business. For example, if you work from home, record the payments you make to a utility company. You do not have to itemize each of these expenses come tax time. However, you can use this comprehensive list as a jumping off point to filing your return when the time comes to do so. The more expenses you have recorded, the more discerning you can be about which to itemize, which to capitalize and which to simply omit from your tax return.

Payments to Make

Remember: the United States tax system is a pay-as-you-go system. This means you cannot wait until year's end to make a payment. If you do, you may be subject to penalties. When your business is incorporated, you can withhold money from your salary like any other employee. In an unincorporated business, however, you will need to write a check to the IRS on a quarterly basis based on your estimated tax liability. If you would like to receive a refund, you may choose to pay a little extra during the course of the year. Many Americans choose this route so they can count on a refund in the spring.

Forms to Submit

You will need to submit a variety of forms to the IRS, including a Schedule C, possible 1099s or W-2s and other forms if you choose to capitalize expenses. These forms are complicated, and this is where an accountant would serve your needs. Since you are determined to do this without the help of an accountant, take a small business finance course. These courses may be offered by the Small Business Administration or a local community college. In either case, the time class at work will be worth the reward in less time looking over forms.

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