Tax season just ended, and many Americans were caught off-guard by the amount of taxes they still owed. Tax bills are higher this year due to several tax law changes that went into effect. It’s too late to fix the tax bill this year, but you can avoid a surprise in 2020. Here are some tips to avoid that large tax bill:
Every time you get cash, save some a little money for pay your taxes
Tax experts recommend at least 25 percent. However, it’s important to put away something, even if it’s not 25 percent.
Make a budget and review it every four months
Make sure you include your income and a high estimation of your spending. Be forward thinking, and create your budget around the previous year’s expenses plus a percentage increase.
Hire one who knows how to classify receipts properly. If you do it yourself, it can cost you a lot at tax time. Hiring an expert can help you focus on what you do best and generate more cash flow into your household or your business.
Be aware of tax law changes
You need to be educated on what’s deductible and what is not. It’s vital that you speak with your tax advisor about changes to items like meal expenses and employee reimbursement. It may be important to change how you record items to make sure you’re tracking them the right way.
You need to remember that personal expenses are not deductible
Magazine subscriptions and gym memberships are not business expenses. Many business owners treat their business accounts like their personal bank accounts. It’s necessary that personal and business expenses are separate. Make sure you have separate bank accounts and credit cards. If the IRS rejects your business expenses, you’ll owe more taxes.