Get a Head Start on Your Tax Return
With April 15 in your rear-view mirror, you probably haven’t given much thought to next year’s tax return. However, by taking a few proactive steps now, you can minimize your tax liability and take the pain out of filing next April. From apps that seamlessly track your expenses to creating good habits around tax management, here’s how to get a head start on your taxes.
Make your quarterly tax payments. If you work for yourself as an independent real estate agent, you are required to pay estimated taxes on a quarterly basis. While it may sound like a hassle, this can help you spread your tax responsibilities over the entire year and minimize the disruption to your cash flow when tax season arrives. To estimate your quarterly liability, figure out your expected income for the year and subtract any anticipated deductions. Then, divide this number by four to get your quarterly amount. You can submit your payment online through the Electronic Federal Tax Payment System. Don’t worry, if you over-estimate your tax responsibility, you will get a return come tax time.
Know your deductions. The IRS allows real estate agents to deduct a wide array of business expenses. It’s important that you understand the allowed deductions so you can minimize your tax burden. The quicker you identify all your allowable deductions, the easier it will be to keep track of receipts and invoices. We’ve put together an informative list of common allowable tax deductions for real estate agents. Familiarize yourself with each one and meticulously gather records of every relevant transaction throughout the year.
Streamline your records. There’s nothing worse than having to tirelessly weed through paper receipts and bank records in search of deductible transactions. Fortunately, there are a number of expenses-tracking apps you can use as electronic filing cabinets that allow you to efficiently store and categorize documents of all kinds. If you don’t want to use an app, you can make tax season less painful by snapping a photo of every receipt and invoice throughout the year using your smartphone. Just be sure to store each image in the cloud so you can easily access it when needed.
Think about a Health Savings Account (HSA). If you’re relatively young and healthy, consider investing in an HSA, which provides tax deductions up-front when you put money in, similar to a traditional IRA. Not only will this help you protect against the high cost of health care, it will give you tax relief while allowing you to accumulate wealth and make withdrawals, tax-free.
Consider getting professional help. Real estate agents have busy careers that leave little time for much else. If your career is booming, it may be time to hire a professional accountant to shoulder the responsibility of tracking and filing your taxes. In addition to freeing you up to focus on clients, this can give you more time to spend with your family. It can also minimize the risk of filing errors and oversights related to allowable business deductions.
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