Three tax tips for the U.S.A

Accomplishing financial success and freedom is a topic that is often on people’s minds. Success, however, doesn’t always mean generating more income; it can also mean reducing costs and expenses. One important way to reduce expenses is to save money on your taxes. Fortunately, there are quite a few tips and ideas you can use to help with your U.S. tax preparation.

1. Keep Your Records

One of the most important tips for tax preparation and saving on your tax bill is to keep and store all your business records and receipts. Many different types of expenses can be deducted from your tax bill at the end of the year. To make this easier, consider using accounting software such as Quickbooks, Quicken, Peachtree, or the free GNU Cash. You can also use a document-scanning and storage system such as Neat Receipts to help you store all your paper documents virtually.

2. Pay Estimated Taxes

If you are a business owner or working for yourself, make sure to pay your taxes quarterly rather than just in April the following year. This will reduce the amount of interest that you may have to pay. If you overpay, you will receive a refund. The best approach is to have a close estimate, in which case you neither overpay or underpay.

3. Set Up a Corporation

If you are a freelancer or a business owner, be sure to look into setting up a business entity. With a corporate entity a taxpayer can have access to more deductions and credits that are simply not available to individuals and sole proprietors. Business classifications such as Limited Liability Companies offer the benefits of corporations without subjecting the owners to double taxation and are therefore recommended for small businesses by many accountants and attorneys. In a regular corporation, the business itself pays taxes and then the owners pay taxes on the income distributed to them; this is called double taxation. An LLC designation avoids this by passing through all income straight to the business owners.

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Posted by FinanceAZ on Jul 22 2010. Filed under Taxes. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry