The 2017 tax filing season is now over and many people are restocking the stash of chocolate in their homes (including the secret one hidden above the washing machine). You are not alone if you treat tax symptoms with creamy, sweet, heavenly chocolate. Tight shoulder muscles? Crunch on a dark and nutty chocolate chunk. Elevated heart rate? Melt a smooth and milky chocolate morsel on the tongue. Adding chocolate to just about anything makes it better. Do you want your chocolate to taste even better? Read on to see our 10 recommendations for easier tax filing. These 10 steps may reduce your tax liability and will enhance your chocolate experience.
Do these BEFORE December 31st:
- Plan now for your annual contribution to HSA plans. Do you want to meet the annual limitations? For 2017, the limits are $3,400 for individuals and $6,750 for families. Learn more details here. Business owners, contributions for you and your employees are deductible business expenses. Colvin CPA can help you meet these limits with payroll deductions over the remainder of the year.
- Create a plan to gather your tax info. Maybe that means logging your mileage, saving your receipts, or organizing your tax docs as you receive them. You could do the old-fashioned shoe box in the closet method or by using apps to make these things easier. To log mileage, we recommend MileIQ. To save receipts, just snap a picture and save it in Hubdoc. Colvin CPA can help you get started on these apps and all clients have a portal folder to download and store documents securely.
- Pay all of your estimated tax payments. For 2017 taxes, there are 4 deadlines to meet (4/18/2017, 6/15/2017, 9/15/2017 and 1/16/2018). You don’t want to be surprised at the end of the year with a penalty or a big unexpected tax bill. Colvin CPA can help you calculate your estimated payments and can remind you about the deadlines.
- Estimate your taxable income for 2017 and see what tax bracket it puts you in. If you are on the cusp of being in a lower tax bracket, consider reducing your taxable income by increasing your deductible expenses. For example, pay bonuses to reward employees, make a contribution to your traditional IRA, or if you were planning a large purchase next year, consider making the purchase in this calendar year instead. If for some reason your taxable income will decrease significantly this year compared to other years (maybe your spouse didn’t work for several months out of the year), you may be in a lower tax bracket than usual and could benefit from rolling over a traditional IRA to a Roth IRA. This will allow you to pay a lower or no tax liability for the funds in your Roth IRA. Colvin CPA can help you with this tax planning and budgeting process.
- If you are an S-Corp, confirm that your medical premiums are accurately included on your W-2. This will allow you to deduct the full amount on your personal return. Colvin CPA can help with this too, if payroll is included in your plan.
- If you itemize deductions (rather than using the standard deduction), you should calculate your itemized deduction and decide whether to bunch up on allowable deductions this year. For example, if your itemized deductions are not much different than the 2017 standard deduction ($6,350 for single, $12,700 for married) you may benefit from paying property taxes for two years in one calendar year or making a charitable contribution this year instead of next year. This will allow you to take a larger itemized deduction this year and select a standard deduction next year. Colvin CPA can help you make these predictions and plan your deductions to reduce your tax liability.
- If you file taxes on an accrual basis, you should record your payables and receivables that relate to the calendar year ending. Ensure that all expenses incurred during the year are recorded as payable on December 31st and ensure that all revenue earned during the year is recorded as receivable on December 31st. Now is a good time to collect on those receivables too, you will be taxed on the income if you have received the cash or not. This is also a good time to write off any receivables that you don’t believe to be collectible. Colvin CPA can help you meet the requirements of accrual accounting and can help manage your receivables and payables so that you know more about your business’s cash flow.
- Plan to make any contribution to your retirement account by April 15, 2018, for it to be included in your 2017 tax filing. Colvin CPA can help you plan the most advantageous contribution and whether it should go to a traditional IRA or a Roth IRA.
Do these ON December 31st:
- Record your odometer reading so you know the total miles driven on your vehicle. Check your mileage log to ensure it includes all deductible business trips. If you use a mileage recording app like Mile IQ, download your mileage log.
- Count your inventory. Update your inventory sheets to include all the products that you have on hand and ensure that you have their latest costs. Inventory is recorded at the cost you purchased the goods.
That’s it! Your planning process is done. Insert dance party here! By the way, if you want to refill your chocolate stash with our favorite chocolates, we suggest “Yes Cacao.”
Splash-In-The-Face: As with all tax advice, be sure to consult with your accountant before making any of these decisions as tax situations change based on each personal situation.