Taxes are close to the last thing on anyone’s mind come to New Year, but the truth is that setting goals for your new tax year are crucially important, especially if you run a business of your own or are self-employed. Taking the time to consider what mistakes you’ve made over the past year, refine your tax returns, update your estate plan, make long-term changes to retirement contributions, and some basic tax planning and prepping can pay dividends in the future.
All it takes is a little legwork to get the ball rolling. As we turn towards 2023, it’s time to take a moment and consider how some basic tax planning-related resolutions can save you a lot of money and headaches. Let us consider some of the smartest, most rewarding tax planning resolutions to make in 2023 and beyond.
Smart Tax Planning New Year’s Resolutions to Make in 2023
1. Gather Your Tax-Relevant Documents
The first and most important tip for anyone with a spotty tax history is to turn over a new leaf and manage that tax information better. Keep your records and keep them tidy. Buy binders and folders, and maintain digital archives. Get a printer, a shredder, and a scanner. Organize a space in your office specifically for tax-related documents, and get yourself a label printer.
If you’re running a business of your own, keep in mind that these purchases are tax deductible – and will help you turn a mountain of paperwork into an easily referenced and professionally sorted tax documentation system. If you have all these things and still struggle to keep your documents organized for tax season, consider working with a tax professional or CPA full-time to ensure you have someone to hold you accountable for your tax-related paperwork chores.
2. Consider a Business Tax Audit
Is your business ready for an IRS audit? IRS audits can be triggered for any number of reasons, and a lot of them are relatively innocuous. The IRS does not suspect everyone they audit of a severe crime, let alone IRS tax fraud. For the most part, IRS audits are either random or triggered by a fundamental anomaly, from suspicious amounts of income versus similar businesses and tax profiles to a business mainly relying on cash-based income and tips.
A professional business audit from anyone other than the IRS can prepare you for the worst and keep you informed about your business’ trouble areas, inefficiencies or big mistakes on your tax returns and reports, and other information that you might be missing or messing up in ways that might flag an IRS audit in the near future. Don’t tempt fate or stick your head in the sand – get willingly audited.
3. Cryptocurrency Investments
It hasn’t been a good year for cryptocurrencies, and crypto as an investment may share a shaky future. But if you did make any financial gain off the crypto wave this year, keep in mind that the IRS may be very interested to hear all about it. The federal government does tax income made through cryptocurrency investments, and it may tax it quite heavily. Report your crypto investments and any other unusual assets (such as foreign investments) – the IRS tends to come down quite hard on unreported income made through these methods.
4. Are Your Old Tax Returns Accurate?
IRS tax returns are more than one-and-done. While the IRS does appreciate it when you file a return on time, it does not have to be 100 percent accurate. However, there are a few risks associated with an inaccurate return:
- The IRS can penalize you for any inaccuracies that it spots.
- Inaccuracies usually lead to underpayment of tax, which leads to unpaid taxes and unexpected tax debt.
- A rushed tax return might take only some of the tax credits, refunds, and deductions you are entitled to.
Get a professional to help you review your financial information and create a more accurate tax return. If your old returns are inaccurate, revise and resend them. Amending your returns from previous years can net you hefty gains – or at least minimize the risk of an audit or unexpected tax debt.
5. Reconsider Who Does Your Filing
Is it time to switch tax preparers? Have you been preparing your returns for the past decade and are starting to get tired of the way the rules change from year to year? Are you sick of template returns and inaccurate, automated online tax preparation services? Get a tax professional to prepare your next tax return and reap the benefits of thoroughly analyzing your financials and tax preparation methods.
6. Are You Being Tax Efficient?
Are you making the most of your returns? Another good goal for the coming year is to be more tax efficient. Proper documentation allows you to qualify for and back up a more significant list of deductions and expenses and further reduces your tax liability for the coming year. If you’re running a startup, taking advantage of income exemptions can let you strategically minimize your tax liability by limiting your income earned in the first year.
7. Maximize Your Retirement Benefits
You can continue to optimize your retirement benefits until Tax Day on April 15th. If you haven’t made your IRA/HAS contributions, do so before the deadline.
8. Set Cash Aside for Tax Payments
If you make estimated monthly or quarterly payments, the worst thing you can do is fail to set aside the money, primarily if your business relies on a relatively tight cash flow at this stage in the growth process. Keep your tax payments in a separate savings account, ready to go whenever the IRS requires its due payment.
9. Pay Off Your IRS Tax Debt
Are you currently in debt with the IRS? Then make dealing with your tax debt a priority in 2023. The IRS can continue to penalize your debt and charge rising interest rates on tax debts, even if you don’t have the means to pay your debt off immediately.
Get in touch with a tax professional and consider negotiating an installment plan to pay your debt off monthly or organize an alternative payment plan. Contact Rush Tax Resolution for all your tax planning, preparation, and resolution-related needs. Contact us today to minimize your tax liability in 2023 and make the most of decades of combined tax experience.