Essential tax prep tips to save money, reduce stress

by Aswad Walker 

For New Pittsburgh Courier

(Defender Network)—Though it seems like the holiday season 2023 was just yesterday, we are already in the midst of tax season 2024, which officially began Jan. 29. And, sure, countless people wait until the last minute to file their taxes, with many even filing for extensions. However, it has been proven that early preparation can save you money and alleviate stress before the April filing deadline.

Jassmine Francis, CAA, founder and CEO of Houston’s Platinum Tax Service, is one of those people who actively encourages individuals and businesses to take proactive steps now, while it’s still early in the tax prep game, to ensure a smoother and more cost-effective tax season.

Francis, a seven-year tax expert, shares the following tips to help navigate the upcoming tax-filing season with ease, efficiency, and options to put a little more money in the bank:

  1. Earned Income Credit (EIC)

EIC changes went into effect on January 24, 2024. Filers should be aware of the maximum Adjusted Gross Income (AGI), investment income, and credit amounts for the tax year 2023. The following are the income thresholds based on the number of children or relatives claimed:

Investment income limit: $11,000 or less

Maximum Credit Amounts:

  1. No qualifying children: $600
  2. 1 qualifying child: $3,995
  3. 2 qualifying children: $6,604
  4. 3 or more qualifying children: $7,430
  5. Self-Employment Expenses

Self-employed and small business owners should start gathering and organizing necessary documents now, including bank statements, cash receipts, and canceled checks to claim expenses.

  1. ROTH IRA

Consider opening a ROTH IRA —a special individual retirement account where contributions are taxed, but future withdrawals are tax-free. This strategy allows money to grow with interest without incurring taxes upon withdrawal. Additionally, you have until Tax Day to make IRA contributions for the prior year, allowing you to contribute toward your 2023 tax year limit of $6,000 until April 15, 2024.

  1. CD Savings

Explore Certificate of Deposit (CD) accounts, offering higher interest rates compared to regular savings accounts. With CDs, interest is earned, and when funds are withdrawn after the term, no taxes are incurred. Rates can range from 4-6 percent depending on the bank and the term chosen.

  1. Business Taxes

Knowing the type of business you have can save you a lot of headaches, mistakes, and time. Everyone should know the difference between an LLC, S-corp, and C-corp.

Limited Liability Company/LLC: is a business entity created by filing articles allowed by the state statute in the U.S. and operated by members/owners that protects them from personal responsibility, debts, and liabilities. LLC can be filed as an S corporation or C corporation.

S Corporation/ S Corp: Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on corporate income.

C Corporation/C Corp: A corporate income tax is first paid by a C-corp with a federal return (Form 1120S) required by the IRS. Shareholders must then pay taxes on personal income at the individual level for any gains from dividends or stock sales. This arrangement is referred to as “double taxation” because of the taxes levied on dividends at both the corporate and individual levels. C-corp

Shareholders cannot write off corporate losses to offset other income on personal income statements.

Business taxpayers should not issue themselves a w2/w4 if they are not an S-corporation. All LLC/ C-corporations should pay themselves cash and claim business on their personal taxes.

S-corporations should file a Form 1120S first and then personal taxes using Form 1120S. S-corporations can issue a w2/w4 form and pay themselves through the business.

Francis also advises individuals to find a qualified tax preparer well before the April filing date to ensure they are comfortable with the preparer, understand potential fees, understand what documents they will need to gather, and validate the person they choose has a preparer tax identification number (PTIN) to ensure they are authorized to prepare federal income tax returns.

(Source: Platinum Tax Service)

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