Why Entrepreneurs Should Have Their Last Three Years of Filed Income Tax Reviewed
As an entrepreneur, it is my perspective your laser focus is on growing your business and achieving your goals.
Do not be blindsided on things that need attention around you.
It's important to pay attention to your financial health and ensure that you're maximizing tax savings opportunities to keep more of what you earn. Once you pay a tax bill, it is not likely you will ever get that money back.
One way to minimize your tax load now and in the years to come is by having the last three years of filed income tax returns reviewed by a different tax professional than the one who prepares the returns.
In this blog, we'll discuss the benefits of this approach and why it's essential for entrepreneurs.
Detecting Errors Tax returns can be complicated, and mistakes can happen. Unfortunately, these mistakes can cause you to pay more in taxes than you needed to, leading to penalties, interest, and other issues that can be time-consuming and costly to resolve. By having a different tax professional review your tax returns, you can catch any errors or discrepancies that may have been missed. This can potentially save you thousands of dollars or help you avoid potential problems and ensure that your tax returns are accurate.
Finding Missed Tax Savings Opportunities Tax laws change frequently, and there may be new deductions or credits that you're not aware of. A different tax professional can review your past tax returns and may be able to identify any missed tax savings opportunities by having the arm’s length non-vested viewpoint. For example, you may have missed a deduction for a home office, on your rental properties you failed to include insurance for the last three years and the error flowed forward because you just failed to add that entry to your spreadsheet you hand over every year for tax prep, yes, it happens! By identifying these missed opportunities, you can take advantage of them in the future and save on your taxes.
Leveraging Tax Brackets Tax brackets determine the percentage of your income that you pay in taxes. By strategically managing your income, you can potentially lower your tax bill now and into future years. A different tax professional can review your past tax returns and provide new ideas on how to leverage tax brackets in the future. For example, you may be able and best served to defer flexible incomes to a future tax year when your tax rate will be projected to be lower, or you may be able to accelerate expenses to lower your taxable income now.
Preparing For The Future By reviewing your past tax returns, a different tax professional can provide valuable insights into your overall tax related financial situation. This can help you plan expenditures and deductions for the future and while making better informed decisions about your business. For example, you may need to adjust your estimated tax payments to avoid penalties, reconfigure benefit programs or consider changing your business structure to take advantage of different tax benefits.
Conclusion In conclusion, having a different tax professional review the last three years of filed income tax returns is a financially savvy move for entrepreneurs few exercise. It can help you detect errors, find missed tax savings opportunities, leverage tax brackets, and prepare for the future structuring of taxable income entries and deductions. By taking these steps, you can potentially save money on your taxes and ensure that your financial health is in good shape. If you haven't had your tax returns reviewed by a different professional recently, now is the perfect time to do so. A small investment of your resources here could reap huge returns now and in the future.