Tax Season 2021 is nearly here. Here are five tips to start preparing taxes today and make tax season less stressful.
It is never too early to start preparing for tax season. For this reason, we have arranged five tips to help people file taxes returns on time and to save money along the way.
1. Adjust Withholding; Make Estimated or Additional Tax Payments
The IRS “Tax Withholding Estimator” enables individuals to perform a paycheck checkup. This tool is important for individuals who received a smaller refund than expected or owed an unexpected tax bill in the past.
If the Estimator recommends a change, employees should make adjustments to their withholding taxes. In such a case, employees submit a revised Form W-4 to their employer. Note that employees should not send these forms to the IRS.
The calculation of quarterly tax payments is especially important for independent contractors and business owners. Quarterly tax payments are required by the IRS. And they prevent contractors and business owners from having a huge tax bill at tax filing time.
Massey and Company calculates quarterly taxes upon request, using sophisticated tax projection software.
2. Gather Documents and Organize Tax Records
We strongly suggest that all taxpayers utilize a tax record-keeping system. Whether electronic or on paper, this system keeps all the important information in one place. Many of our Georgia-based business clients use smart phone apps to take photos of their receipts and save them online. Please note that taxpayers should keep copies of filed tax returns and all supporting documents for at least three years.
To avoid refund delays, be sure to gather all year-end income documents before filing a tax return. Filing too early, before receiving key documents, often means a taxpayer must file an amended return to report additional income or claim a refund. Furthermore, it can take up to 16 weeks to receive a refund from an amended return.
Remember to also notify the IRS of address changes. Also, be sure to notify the Social Security Administration of legal name changes (such as when getting married) to avoid refund delays.
3. Renew Expiring Tax ID Numbers
An ITIN (Individual Taxpayer Identification Number) is a tax ID number used by a taxpayer who does not qualify for a Social Security number. Taxpayers with expiring Individual Taxpayer Identification Numbers can get their ITINs renewed more quickly and avoid refund delays next year by submitting their renewal application soon.
Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits. With nearly 2 million taxpayer households impacted, applying now will help avoid the rush as well as refund and processing delays.
4. Be prepared to File Taxes Electronically; Use Direct Deposit for Refunds
Electronic filing is the easiest, safest, and most accurate way to file taxes. Direct deposit combined with electronic filing offers the fastest, easiest way to get a refund. Furthermore, direct deposit eliminates the worry of lost, stolen, or missing refund checks.
A direct deposit is easy to use. Taxpayers select it as their refund method through tax software or tell their tax professional. As an added benefit, direct deposit is less costly to the IRS, saving taxpayer dollars.
Massey and Company offers electronic filing and direct deposit to all its clients.
5. Small Businesses Should Make Sure Their Accounting is Ready for Taxes
If you have a small business, you must have some kind of accounting or bookkeeping system in place. This is critical for tax preparation. In fact, you cannot prepare a tax return for a business without it. Accounting and bookkeeping is also extremely helpful for making business decisions, such as budgeting, hiring, or buying equipment. And as your business grows, it becomes nearly impossible to keep track of who owes you money if your books are not clean and organized.
Some business clients in our Atlanta CPA firm like to use excel to keep their books. That is fine, especially if they want to manage the books themselves and keep costs at a minimum. However, if their business is growing and they are considering the tax benefits of an S corporation, business owners should consider an upgrade to a more formal bookkeeping and accounting software, such as QuickBooks Online, Xero or Bench.
At a minimum, be sure to work with an accountant or bookkeeper who is able to reconcile your accounts on a monthly basis. That is how you know that your numbers are right and that you will be ready for the preparation of your 2020 tax returns.
Feel free to call our firm at 678-235-5460 to discuss which type of bookkeeping and accounting is best suited for your business.
If you are sick of doing your own taxes, why not give Massey and Company a try!
Founded by Gary Massey, Massey and Company is a boutique CPA firm located in Atlanta, GA, serving the needs of small businesses, business owners and individual taxpayers. Our services include tax preparation, tax planning, taxpayer representation, IRS audits, and monthly bookkeeping and accounting.
Our office is in the Buckhead – Sandy Springs neighborhood of Atlanta.