A Florida newspaper recently put out an interesting report on the difference a bookkeeper can make. This specifically for individuals who had the same gross income, classification method, timing, filing status, and more. However, these methods can also be applied to business owners. They resulted in 5 ways a bookkeeper can better your tax outcome.

1. A Bookkeeper Will Help You Choose the Correct Filing Status

Most taxpayers and businesses have several options on how to file each year. For individuals, this includes single filers, single filers with dependents, married couples filing jointly or separately, and even head of household. Businesses have various status they may register for and file as. This includes different types of LLCs, corporations, gig and freelance work, and many others. The point is that two identical families or businesses can have the same amount of income and expenses but receive a less favorable outcome if they choose an incorrect filing status.

A bookkeeper can help you choose the correct status – and even file for it in your state. They can also tell you which status works best for items such as tax rates, credits, deductions, etc.

Did you know? You must report income shared as a gig or on the side to the IRS? This includes any work paid for in cash, credit, property, and even crypto currency. Source: IRS

2. Get Your Expenses and Income Timed Correctly With the IRS

Those of you planning to claim beyond standard credits and deductions should take not of your timing. This includes many businesses including those who are self-employed. A regularly salaried employee generally has deductions taken from their paycheck to deal with this. All others can be subject to higher rates when paying in later, or lower tax rates when in paying early.

3. Credits and Deductions Will be Accurate

Many business deductions include business mileage, contributions to retirement accounts, home office use, and others. Common credits include the Earned Income Credit, Child Care, and many others. However, your filing status may forbid you from filing for these even if they are legitimate expenses. Additionally, many credits and deductions are missed because taxpayers do not have their records organized or even know they are eligible. A bookkeeper can tell you with 100% certainty if you can and should file for these.

Did you know? Approximately 28% of taxpayers fear not filing correctly as their top concern during tax time? Another 25% report not filing income correctly from sources such a side gigs and gambling/lottery winnings. Source: CPA Practice Advisors

4. Help You Know How Incomes are Taxed Differently

The IRS generally classifies most income as:

  • Wages or salary.
  • Revenue from business in sales of services or products.
  • Income from investments.
  • Contract income.

It is essential that your bookkeeper knows which income qualifies as which. Additionally, you must file correctly to both have your tax return approved and receive the best outcome.

5. Match Your Tax Records to Corresponding IRS Records

Did you know that your employer, digital platform employer, bank, and others are most likely sending your tax information to the IRS? This includes a W-2, 1099, and even forms that show income from investments, sales, and more? A bookkeeper can ensure the numbers on your tax return are identical to these forms. In the instance of mismatched numbers, the IRS can tend to side against the taxpayer, especially if the other forms show you owe more of a tax burden.

You may read the entire article here on the Carroll County News.

Ways a Bookkeeper Can Better Your Tax Outcome in Houston

Are you worried that you are not getting the most favorable tax outcome? The bookkeepers at B&J in Houston can tackle all of the above and more to help you resolve this.