What To Do in Your Finances Now That Tax Season Is Over
I know tax season is officially over, but it's the perfect time to reflect on how things could have been better for you while the experience is still fresh. Let’s talk about a few key areas where you can reduce your headaches and get ahead of your tax preparation for next year!
Tracking your mileage is as simple as using the MileIQ app to track your drives to meet with clients, attend events, make deliveries, etc. The IRS wants to see consistent recording if you're ever audited, and this software is one they actually approve. A spreadsheet works, too, if apps aren't your thing. Just be consistent with your recordkeeping, and map every single drive. No guessing on dates or miles driven!
Do you have contractors or consultants who you pay over $600? If so, the IRS is looking for a 1099 from you to report Miscellaneous Income.
What will you need to file this 1099? You’ll need identifying information from your hired contractor, the amount you paid him/her during the year, and software that allows you to e-file.
What’s the easiest way to get the information you need from your contractor? Have him or her complete and return to you an IRS W-9 form. It’s the simplest way to obtain all of the information you’ll need to properly process the 1099.
Are you dreading the large lump-sum payment you’ll need to make in order to cover this year’s taxes? It can put a huge dent in your available funds if you’re not prepared. One way to change this is through paying estimated taxes.
Estimated taxes allows you to make periodic payments to the IRS in order to satisfy your tax liability.
How much you pay depends on which tax bracket you’ll fall into by the end of the year. You can look back at prior year’s tax returns for an estimated tax rate. Or, you can base your estimate on your annualized profit this year and which tax bracket that number falls into. Once you determine your quarterly profit, you’ll compute and pay taxes on that amount.
I hope that providing some guidance in these three areas will help you to gain some headway in preparing for next year’s taxes and give you confidence that you’re making strides toward better money habits this year!