1. File an extension.
Not only does filing an extension give you more time to prepare your tax return, it also gives you extra time to make retroactive contributions to your SEP-IRA for tax year 2017.
2. Fund a SEP-IRA.
Freelancers can set up a special type of retirement account designed for self-employed persons. It’s called a SEP-IRA. With a SEP-IRA, you can contribute up to 20% of your net profits (that’s after expenses) towards retirement. Contributions to a SEP-IRA are tax-deductible, meaning that every dollar you put into the SEP-IRA will reduce your taxable income by $1.
3. Keep those receipts.
Clients ask us all the time, “Do I really need to keep all these receipts?”
Yes, you do. The reason we ask you to keep receipts is just in case the IRS decides to examine your tax return. This doesn’t happen frequently, but when it does happen, having receipts will definitely go a long way towards explaining what you bought.
Suppose you bought a $30 keyboard on Amazon and wrote it off on your tax return. A couple of years later, the IRS decides to ask some follow up questions. The IRS looks over your tally sheet where you added up all your deductions, and they see you that you spent $30 at Amazon. Just looking at that, the IRS agent might wonder, was this a personal expense or a business expense? You pull out the receipt, and they see that the $30 was for a keyboard. Now the IRS agent can see how that’s a legitimate business expense, and the agent moves on to other questions.
4. Remember your estimates.
The first estimated tax payment for the year 2018 is due by April 17, 2018.
If that due date rings a bell, that’s because it’s the same day that the final tax payment for the year 2017 is due, and the deadline to file your extension (or to file your tax return). With all these deadlines happening on the same day, it’s easy to feel overwhelmed. Just remember, it’s the last day to pay for the past (2017) and the first day to pay for the future (2018).
5. Hire a better brand of tax professional.
Yes, this is a pitch for our services. But here’s the point. When shopping around for your next tax advisor, consider what you really need. Do you need help just once a year? Or do you want year-round help? Do you want your tax person to take a hands-off approach? Or do you want a tax advisor who will proactively reach out to you when they spot opportunities to reduce your tax bill?
At Visor, we believe our clients deserve year-round service for a flat fee. That way, clients are free to contact us anytime of the year if a tax question comes up or they need planning out their year-end tax moves.
Done filing taxes alone? New clients can prepay $99 to lock in your spot!