Many businesses regularly overlook 3 common mistakes that wind up costing them dearly and obstructing their path to a successful venture.
A lot of business owners go into business because they are good at making widgets or good at providing a service. New business owners quickly find out that managing financial operations is quite a monumental task. It’s common for business owners to encounter the following pitfalls:
How does the government shutdown impact the IRS?
The 16-day government shutdown came at a pivotal time for the IRS as they were prepping their complex systems for the 2014 tax season. Only 10% of IRS were open during the government shutdown. This put the IRS behind by almost 3 weeks.
Bundle expenses for itemized deductions.
Will your itemized deductions for 2013 be right around the standard reduction amount? If so, you can bundle expenses for every other year and claim the standard deduction in the in between years. Over two years, this will significantly cut how much income you’re taxed on.
Deferring income could lower your taxes!
If you work for yourself and pay your taxes in cash, it may be a good idea to hold off on sending out invoices until towards the end of the year. And if your clients pay you net 30 or 60, there’s a good chance you won’t receive payment until 2014. By doing so, you can lower your tax bracket which will lower your taxes.
Did you know anyone paid for babysitting has to report that income to the IRS? Or let’s say you and a neighbor want to trade cars, you’ll still have to pay taxes on what the fair market value of the car you bartered. But not all income is taxable. Here are some examples of income you don’t have to pay taxes on:
College tuition is rising. In fact, it has risen in costs 500% since 1985! It is outpacing inflation by 121%. Not only is it outpacing inflation but it has eclipsed rising healthcare costs by 286%! Yikes!
The average student goes in debt for about $20,000 and 8% of students have a loan of $40,000 or more. So what is the best way to save for college to ensure your children aren’t swamped in debt for all of their career?
Looking for a new job isn’t actually ‘taxing’ after all. Did you know that you can deduct costs related to your job when you file? All the things like paying for LinkedIn Premium, hiring a recruiter and good ol’ printing and mailing resumes can add up.
If you are starting a new business it’s important you start out on the right foot with the IRS.
You’ll want to make sure you correctly identify how you will classify your business for tax purposes. Not correctly choosing the right one can leave you vulnerable to tax penalties and liable for damages caused by your business.
When you don’t budget for reality, 1 of 2 things will happen: you’ll come up short on paying for everything you’ve budgeted or you’ll absorb the unexpected expense in the form of debt. Neither is good (credit cards are a dangerous form of planning for emergencies).
Deal with it now!
If you’ve received a notice or letter from the IRS, it’s best to deal with it right away. The more letters they send out the harder they are to deal with.