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Worried about how much you'll have to pay in taxes this year? Here are five simple ways to decrease what you owe:
1. File your income tax return on time or obtain a filing extension. If you don't, you risk interest and penalties for late filing. You also lose the opportunity to make certain tax choices required on a return filed on time.
2. Use retirement plans not only to save for your retirement needs, but also to reduce current taxes. If you have not yet set up a retirement plan, consider a Keogh, SEP, or SIMPLE plan to put more away on a tax-deductible basis than you can under an IRA. Contact a financial advisor to set up a retirement plan.
3. Keep good books and records for your business. Keep these records separate from records of your personal expenses. Keep good records to track both small and large expenses; small expenses can add up to significant expenses. Keep these business records as long as necessary. Generally, this is at least three years after the date you filed your income tax return. In some cases, however, it's a good idea to keep records even longer.
4. Keep records to substantiate your travel and entertainment expenses for your business. While you don't have to keep receipts for expenses (other than lodging) of $75 or less, you must still note in a log or diary the business purpose for the expense, the date it was incurred, and the amount you spent.
5. Make sure to run a part-time business in a business-like manner, in case it incurs a loss. By keeping records of your part-time business, you'll be able to prove a profit motive and deduct the loss of the business from your taxes. Keep separate books, records, and business bank accounts and change business operations with an eye toward making a profit.
Your Money & You Staff have written a series of finance related articles. For additional information on related topics, visit http://yourmoney.accion.org
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
