Top 5 New Year Tax Resolution
Every year we make a list of resolutions that we promise ourselves that we will do or not do to better ourselves. But not everyone knows that you should also make a new year tax resolution list so that your life gets easier come Tax Day!
Here are the top 5 new year tax resolutions that you can do to make your life easier when Tax Day arrives:
1. Update your bookkeeping practices
From a business point of view, bookkeeping helps you know whether you’re making money and provides key information to help you take action–such as adjusting prices, cutting expenses, or raising money.
To ensure that your business receives all the deductions and tax credits to which it’s entitled in 2021, you’ll need to keep good records. Often business owners fail to pay attention to this detail until it’s too late and the IRS is questioning deductions claimed on a return.
To meet tax law requirements and ensure compliance with related laws, you should establish and follow a bookkeeping system. You can use software that can help you with bookkeeping, such as those for tracking business travel and entertainment expenses.
2. Take note of your odometer
You can deduct the cost of business driving only if you have the records to back this up. That means noting your odometer reading at the start of the year, and then tracking your business trips regularly.
Consider using an app for tracking mileage. Some are free, and others cost a modest amount.
3. Spend Wisely
To save money on the tax bill this year, consider spending money you’ve saved for other things on dependent care or medical expenses, which can in turn reduce your tax bill. Many employers offer this benefit.
Flexible spending plans allow you to use pre-tax dollars for dependent care, medical expenses, and health insurance. Employers deduct pre-determined amounts from paychecks and place the funds in an administered account that releases the funds when the expenses are incurred. And since contributing to a flexible spending account lowers your gross income, it keeps more money in your wallet.
4. Pay Close attention to Crypto transactions
For the past few years, buying, holding, and selling crypto didn’t need to come with a bunch of paperwork and documentation. However, the IRS started cracking down on unreported crypto transactions that result in profits or losses. It would be best if you are able to properly document the necessary details every time you buy or sell crypto by using software developed for the main purpose of recording crypto transactions for tax reporting purposes.
5. Work closely with your tax professional
Many prefer to do their taxes themselves, but these people only work on their taxes once a year. Compare that to tax professionals that are certified and experienced to do taxes for everyone, every year. Work closely with your tax professional to get yourself the latest news and updates related to your specific tax situation.
Your tax professional is here to help you make sure that your tax reporting is fully compliant with the ever-changing rules and policies surrounding taxes.
Bottomline
Taxes are here to stay and everyone must do it every year. It is up to you if you prefer to sprint at the last minute to get everything done for your tax reporting or if you prefer to have your peace of mind when Tax Day comes. These new year’s tax resolutions can go a long way if you start at it while the year is just getting started. If you are not sure that these new year tax resolutions will fit your special tax situation, you can always get in touch with our experienced Enrolled Agent to help you with your tax planning for this year!
