Owe Money to the IRS? Use These Money Saving Tips Before You File
Tax time is not fun, but reaching the end and finding you owe money is even worse. If the results of your tax preparation activities are less than optimal, you might think the only choice is to write the check, but that may not be the case.
We specialize in helping people who owe $10,000 or more to the IRS or have years of unfiled tax returns. If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today.
However, depending on the circumstances and the time of year you’re reading this, you may be able to trim your tax bill now, before you file and write that check. Here are some possible ways to trim the high cost of filing taxes and keep more money in your pocket.
Boost Your Year-End 401(k) Contribution
This might not help you for 2021 but planning ahead is always key and for 2022 you still have time to increase the amount you put into your 401(k) plan at work. All it takes is a form from HR and a simple instruction and you will be putting more money aside for the rest of the year - and reaping the tax benefits when you file.
Boosting the amount you put into your 401(k) for the end of the year is one of the best ways to reduce your taxable income. You might even decide to make the increase in contribution levels permanent, giving you an additional benefit year after year.
Beef Up Your IRA Contributions
You have until the tax filing deadline to make your final IRA contribution, and putting more money in now could save you a lot of money when you file. If you qualify for a deductible IRA, you can use the contributions to reduce your taxable income, giving you a big benefit and helping you save a lot of money.
It is important to check the contribution limits carefully to make sure you do not run afoul of the IRS regulations. If you contribute too much you could end up with a penalty, and that will erase any benefits you would otherwise have received.
Sell Your Losing Stocks or Crypto Investments
If some of the stocks or crypto you bought have been less than stellar performers, cutting them loose could save you money on your taxes and free up the remaining cash for better investments. This strategy works particularly well if you have capital gains elsewhere in your portfolio since you can use the losses on some stocks to offset the winners in your portfolio.
There are a number of things to consider when using this strategy, including how long you have held the stock and your feelings about the company. If you are unsure about how to make the sale, or whether or not you should, just check with your broker or financial advisor.
No one wants to owe money to the IRS, and the tax agency can be especially difficult to deal with. If you want to avoid this unhappy scenario, sound tax planning throughout the year is your best defense.
If the results of your careful planning still show that you owe money to the IRS, there are things you can do, even late in the game. The steps listed above can reduce your overall tax bill and give you more breathing room with the IRS.
OWE BACK TAXES?
Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen taxpayers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options.
Gig Workers and the IRS: 3 Steps to Tax Filing Success
If you are a member of the gig economy, you are not alone. Millions of others have made the same choice, voting with their feet and their time, and leaving the world of traditional employment behind.
As a member of the gig economy, you have a lot to look forward to, but tax season is probably not one of them. April 15 is a stressful day for everyone, but gig workers face some additional challenges their traditionally employed counterparts do not. Faced with these issues, it's important to tackle the problem head-on. Here is a three-step plan for making tax time a little more manageable.
Note: It’s not uncommon for gig workers to find themselves behind on their taxes. If you find yourself in tax debt, owe back taxes or are under audit, our firm can help negotiate with the IRS and potentially settle your tax debt.
As a tax resolution firm, we always recommend that you reach out to a professional who knows how to aggressively negotiate and defend you against the IRS on your behalf. Call us today. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. That said, let's jump into the 3 steps.
Step 1 – Start As Early As Possible
It's always a good idea to start your tax planning early, but it's even more critical when you are self-employed or a member of the gig economy. If you are used to getting your taxes done in the afternoon, you have a serious wake-up call in front of you. If you do not start early, you might not finish on time.
Keep in mind that you may not be able to file early, as it likely will take some time to wrap your head around the complicated tax laws, find the right tax professional, research deductions, and ensure that all your income numbers are correct. That does not mean, however, that you cannot start early. Taking initiative early is sure to make your life less stressful when the April 15 tax filing deadline rolls around.
Step 2 – Make Sure You Are Accounting for All Your Income
It's easy to overlook some of your income when you are self-employed, especially if you are juggling multiple clients and doing possibly hundreds of different gigs. If you let something slip through the cracks, however, the IRS is likely to call you on it – and hand you a big tax bill for their trouble.
As you get ready to file your taxes, take the time to add up all your income across many different sources, including gig work, freelancing, consulting work, and anything else that brought in money in the year just past. You might even want to cross-reference that income against other sources such as bank deposits and payments by payment processors like PayPal, Stripe, and others. This final step could help you uncover income you might otherwise have missed.
Step 3 – Review Your Possible Deductions
The bad news is that being a member of the gig economy can cause some tax headaches but there is good news as well. As a gig worker or self-employed individual, you have access to some lucrative tax deductions, and now is the time to review and claim them.
Depending on your situation, you may be able to write off things like the amount you pay for internet access, phone service, and office supplies, and those deductions could lower the amount of income subject to the self-employment tax, an important consideration for gig workers and their families.
If you maintain a dedicated space for conducting business in your home, you may be able to take the home office deduction, but it is important to know and follow all the rules. Doing this wrong can trigger a nasty letter from the IRS. These rules can be complicated, and that brings up one final piece of advice.
When you work for a traditional employer, your tax filing needs are pretty simple. Your employer sends you a W2 at the beginning of each year, and you simply report the amount you made and how much you paid in taxes. From there, it's simply a matter of math, and in no time your taxes are done.
Your life and your tax situation are far more complicated when gig work and self-employment income are involved. Even if you have been comfortable doing your taxes up to now, your first year of gig work might also be the first time you reach out for help.
The gig economy is going strong, and this fast-growing segment of the economy is showing no signs of slowing down. If you have been working in this economy, you have enjoyed the freedom and flexibility inherent in the business model, but now it's time to pay the piper – and the IRS. The three-step plan laid out above can make tax time at least a little easier, so you can get on with the rest of your life.
Owe Back Taxes?
If you find yourself a large surprise tax bill or a collection notice from the IRS, the steps you take next are absolutely critical. Trying to take on the IRS on your own is a dangerous, and potentially expensive, thing to do, and you should always contact a tax resolution firm.
By working with an expert, you can gain access to vital information about small business settlement programs the IRS offers. You can gain access to the expertise you will need to settle your tax bill for less than you owe and get back in the good graces of the IRS. Time is of the essence when the IRS comes calling, and with the interest and penalty clock ticking you do not have one second to waste. So call us, your tax resolution expert, for a case evaluation.