With another tax filing deadline in the rearview mirror, most people don’t think about taxes until the next year.
However, take a few moments to review your return before you stock it away. This year’s return can provide valuable information on the financial health of your business, as well as show you ways to improve your tax situation in time for next year’s filing.
Tax Return Lessons Learned
1. Do You Feel the Self-Employment Tax Pain?
Do you feel like you are paying too much in self-employment taxes? You’re not alone, especially considering the rate for 2013 is higher than it has been the past few years.
If you make self-employed income, there’s not a lot you can do to avoid this tax completely. However, you can check with your CPA or tax advisor to see if changing your business structure to a corporation or LLC that’s taxed like an S Corporation can help lower your SE taxes.
In addition, the most important strategy for dealing with self-employment taxes is making sure your prices reflect this increased cost of doing business. Employers and employees typically split Medicare and Social Security taxes. But when you’re self-employed, you are on the hook for the whole thing.
This higher cost needs to be factored into your pricing.
2. Did You Struggle With Your Documentation?
To make the most of your business tax deductions, you’ll need accurate, comprehensive records. If you don’t keep track of your business expenses throughout the year, trying to remember every expense and round up every receipt can be a major hassle. Some legitimate expenses are bound to slip through the cracks, meaning you’ll end up paying more in taxes than you should.
If you struggled to prepare your records, receipts, and other documents this year, make a plan to get organized for your 2014 return. Find a method for documenting expenses that works for you.
There are dedicated apps like Expensify for tracking expenses, Milebug for recording mileage, or Shoeboxed for capturing paper receipts. In addition, your accounting program, like Mint, QuickBooks, or FreshBooks will let you record and manage expenses.
You’ll be grateful come tax time next year.
3. Are You Saving Enough for Retirement?
Your tax return can tell you whether you’ve made the most of your retirement savings options. If you haven’t, it’s a good idea to change your habits. After all, when you are self-employed, you are fully responsible for your retirement savings.
For example, if you qualify for a SEP-IRA and didn’t make the full contribution last year, see if you can step up your savings this year. The same advice goes to employees who aren’t contributing their full share to an employer-sponsored retirement plan.
Read more: Lessons Learned From Your 2013 Tax Return