Tax Day – It’s Not What You Make, It’s What You Keep

By Michelle Seiler-Tucker, Special for  USDR

The poor state of the US government’s economic policies does not seem to be deterring willing buyers and motivated business owners of small sector operations who are somehow managing to push ahead in spite of it all. Regulation meddling and taxes are among the top anxieties for small businesses. While Obama prides himself on enacting a $500 tax credit for working households of two, which was indexed for inflation, and while inflation is a naturally occurring process it can also spike exponentially when the Fed decides to print money to fund policies by our  government.

The acceleration in growth follows the Federal Reserve’s termination of the quantitative easing buying sprees. The Fed has taken interest rates down far enough to be more than attractive, but growth prospects (cash flow, profits) are only mediocre. Money isn’t cheap if it can’t be deployed profitably. Buying a trillion dollars of bonds doesn’t produce jobs, the Fed has proved  that

Here’s what’s going on and this is why it matters: your US Federal taxes are due! The average work week is over 40 hours now, and the IRS has decided to veer from its job description and play the role of US job creator as well, after requesting funds for 9,000 new positions that would work to enforce Obamacare regulations. These additional jobs will count as added Gross Domestic Product (GDP), which means more people working on taking rather than making something useful like a service or product, which means someone—you, a US citizen will be taking on the taxing burden of financially covering the expenses via heightened  taxes

Each year the IRS makes changes to the tax code, and this year is no exceptions. One out of every four businesses will be affected by the affordable Affordable Care Act. For those businesses or individuals that do not offer private insurance, market insurance, or any type of qualifying insurance at all, they will be required to pay the dreaded fine. However, despite proposals for ongoing increased costs, there are ways to bypass and cash in on the ultimate tax  refund.

No one expects you to understand everything there is to know about taxes. That would be pretty impractical being that The Internal Revenue Code is about five times longer than the Bible. In addition to it being a tedious and confusing process, tax preparation is mostly unregulated. There are no minimum educational, training, competency or other standards. In 47 states, there are more regulatory requirements for hairdressers than tax preparers! Isn’t that  crazy?

This tax year, several changes have taken place, such as the standard deduction being higher than it was last year. The income thresholds for each tax bracket have also changed, as well as the maximum earned income credit and the annual exclusion for gifts, for instance. Of course taxpayers should take advantage of any and all tax benefits to which they are entitled. If you have a lower income and your tax liability is easily zeroed out through basic deductions good advice would be to take the standardized deduction so you can qualify for other benefits such as refundable credits. If, however you are a higher tax liability that’s not zeroed out consider the ins and outs of every income option or tax-reducing  scenario.

The self-employment tax refers to the employer portion of Medicare and Social Security taxes that business owners must pay. Everyone who works must pay these taxes, which is almost double the percentage of the average worker. Many people view the self-employment tax as a discouragement to entrepreneurship, but believe it or not, the IRS does a few things to lighten the load. The computer that you both play and work from can be deducted as a business expense. The government also reimburses those who commute. For taxable years beginning in 2015, the monthly maximum for commuter tax benefits is a refund of up to $380 per month.  Additionally, the IRS allows self-employed workers to deduct half of their self-employment taxes from their net income. The IRS considers the self-employment tax as a business expense and permits it to be deducted suitably. Moreover, self-employment tax only incurs on the net business income, or what’s left over after deducting business expenses. Ultimately, this means that no matter what, if you are a contract based worker or are self-employed you are the one who bears the exceptionally high tax burden, so make sure you are invoicing people a high enough rate to make a living that doesn’t leave you in the red after tax season. That means stop saying yes to projects from people are always asking for a deal, a discount or  favors!

Meals and entertainment are a joy for all but also necessary in the business networking arena. To deduct these expenses you must conduct business with the individual or group you are engaging during the event or immediately before or after it has taken place. These expenses are only 50% deductible. Examples of deductible expenses in this category include tickets to a sporting event, the cost of a meal, or the cost of entry to a social affair. Be certain to keep scrupulous records of all business activity you conducted, when, with whom, and how it directly relates to the entertainment  expense.

The government is willing to subsidize retirement planning through Individual Retirement Accounts, 401(k)-style workplace programs and more, yet many people underutilized these benefits. The rules are intricate, especially for the different types of IRAs, but retirement accounts remain one of the best ways (along with diversification) to accrue wealth, and there has been recent discussion of restricting tax benefits as the government deals with its own financial burdens. While retirement tax benefits might be in jeopardy, it’s best to take advantage of them while its  available.

As a business owner, I can state that the best way to tax reduction is through owning a business. In fact, the government makes it easier to reduce tax liabilities for the small business owner. But it is your obligation to remain astute and vigilant for every tax-saving opportunity that is offered through deductions, credits, depreciation and payroll-tax reductions. Keep more of your profit in the attempt to pursue the life that you’ve always dreamed for  yourself.

5 Ways to Save Money on T axes

1.Adjust your  withholdings.

Adjust your withholdings on your W-2 to receive more income from your paycheck. Just complete a new W-2 form with your employer and you’ll have more cash in your pocket to pay down debt or save for  retirement.

2.Donate to charitable  causes.

To earn tax deductions while helping those in need, consider donate goods that you no longer use. Keep a precise account of what you donate throughout the year. Any donation worth more than $250 will require a receipt, and there are limits to donating more than 20 percent of your adjusted gross  income.

3.Save for  retirement.

Contributions to an employer-based 401(k) plan are made pre-tax. Depending on the specific circumstances and level of income, it is possible to write off what was contributed to a traditional  IRA.

4.Go  green.

There is an assortment of green energy tax credits available to the US citizen. If you install alternative energy equipment in your home, it isn’t unusually to receive a tax credit for 30 percent of the cost of purchase and installation. Credits worth up to $7,500 for electric automobiles are also  available.

  1. Keep precise  records.

If itemized deductions total more than the standard, you’ll receive a bigger return. To benefit from this, accurate record keeping is absolutely necessary. Items needed include, among other things, receipts and documents related to non-reimbursed job-related expenses, job search expenses, charitable donations, and non-reimbursed medical  expenses.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.