Why You Should File Your Taxes Early

Are you one of those taxpayers who waits until the last minute to file their income tax returns? If so, don’t worry, because you are not the only one. Most people file their tax returns on or about April 15 each year. But do you know the many perks of filing your taxes early? Aside from avoiding the last-minute hassle and stress of finding super tax services, there are many benefits to filing your taxes early, and some of them are listed in this blog post. Let’s get started!

● Get your Tax Refunds Sooner

Filing taxes sooner means taking a step towards receiving a faster tax refund. The IRS is not as busy in the early part of tax season as in April. So when you have money to get back, file your taxes as soon as the IRS begins processing returns. This way, you will get your income tax refunds on time, and you can use them to pay your bills and other things!

● Obtain Financial Information

Preparing for tax filing can help you obtain essential information. For instance, home buyers often need a completed tax return as proof of their household income, and students need some financial information to apply for financial aid. If you get your taxes done on time, you can start your paperwork early for multiple other processes.

● Avoid the Risk of Tax Fraud

Identity theft is a common problem that taxpayers face while filing their taxes. Someone else can file taxes in your name and take your refund. Such cases increase at peak time. But when you file your taxes sooner, there are fewer tax frauds and, even if something happens, you have more time to solve the issue.

So, avoid the last-minute rush and reduce the chances of mistakes by filing your taxes on time. You can also get help from income tax services for the self-employed at Agro Accounting CPA, to make your tax preparation smoother.

Incredible Income Tax Tips for the Self-Employed

Being self-employed increases the amount of record-keeping you have to do for tax purposes. However, having your own business will give you some tax breaks that your employed friends can’t get. Managing income taxes as a self-employed person can be overwhelming. Follow the tips below to make tax time less painful and take advantage of some of the tax benefits that come with working for yourself:

• Estimate your business income and determine where you stand taxwise
• Time your income near the end of the year to your advantage
• Mindfully time your expenditures
• Make the most of medical insurance deductions
• Keep the structure of your company simple, especially as a sole proprietorship
• Automate your record-keeping and sync your bank accounts
• Understand the differences between business deductions and itemized deductions
• Set aside some money for your children’s college, as this amount can be deducted from your taxable income
• Increase your self-employed retirement contributions
• Hire professionals at Agro Accounting CPA

If you can’t find the time and energy to manage your tax-related tasks, reach out to Agro Accounting CPA and get best-in-class assistance on income taxes for the self-employed.

Understanding a “CPA Letter for Verification of Self Employment”

A CPA letter for verification of self-employment is a document issued by the CPA of a loan applicant. In this document, a CPA verifies that he or she has prepared the applicant's tax return and that the applicant is self-employed. So, this letter verifies the self-employment status of the loan applicant. Usually, banks, landlords, and lenders ask the self-employed person for a CPA letter for verification of self-employment for the approval of a loan. Read this blog post to learn more about this document!

What Should the Letter Include?

The letter should be signed by the CPA, and it should be on the CPA's letterhead. In addition, it should contain the following things:

● Name of the applicant

● Business name, address, and phone number of the applicant

● Nature of business

● Number of years applicant has been in [this] business

● Percentage of ownership

● Time since the CPA has prepared tax returns for the applicant

● Applicant reviewed his/her tax returns prior to their filing by the CPA

In most cases, professionals like independent contractors, people owning a single-member LLC, and other small business, freelance, and self-employed individuals are asked for such a letter.

Things a CPA Should Consider Before Issuing the Letter

CPAs should check their professional code of conduct and ethical standards before issuing such letters. They should verify the factual information on hand and avoid forward-looking statements, projections, and opinions. Also, the CPA should not assure the credit-worthiness of the borrower. Along with that, applicants should also obtain a copy of their CPA’s letter and ensure the accuracy of the information in the letter.

If you ever need help with such letters or other accounting and tax-related tasks, you can get in touch with Agro Accounting CPA and hire accounting professionals for the self-employed. Our skilled and experienced CPAs can help make your tasks hassle-free.

How Artists can Benefit from Doing Income Taxes with Online Accounting

Online accounting or e-accounting is the application of internet technologies to the business accounting function. Everything is the same in online accounting: the entire process has simply moved online. Many well-reputed income tax service firms for the self-employed have shifted to online accounting. Have a look at the five main benefits of online accounting for artists.

1. Get Rid of Paperwork

Online accounting reduces your reliance on paperwork. It eliminates the need to print information on physical sheets, store it, and deal with a bundle of paperwork. You can access all of your information online and download digital documents by logging into your account.

2. Affordable

Online accounting companies have online platforms that allow them to directly transfer documents to their clients, which removes the costs of printing and postage. This eventually reduces the price of online accounting services and offers affordable accounting for artists.

3. Mobile Access

You can access key accounting information anytime, anywhere. Online accounting uses cloud servers to safely store data and records in encrypted form. You can easily access all your information by using your smartphone or laptop.

4. Secure Document Transfer

You can send all of your documents to your accountant online, through a secured exchange portal. You get all the accounting services from the comfort of your home! Accounting firms that do income taxes for artists have document exchange portals fully compliant with IRS security requirements.

5. Easy Tracking

You can easily track your expenses and income with online accounting. All of your information is available on easy-to-read sheets where you can easily go through all your financial information for the last months. For example, you have all information about your outstanding debts and a clear breakdown of how much you owe in taxes. This helps give you improved control of your core finances and taxes.

A Brief Small Business Taxation Guide: What You Should Know

Just like any business, small businesses must pay taxes. However, there are some benefits afforded to small businesses in particular... Here’s what you should know! First, before that: if you are looking for a comprehensive tax preparation guide for artists, entrepreneurs, or the self-employed, do not hesitate to contact the Agro Accounting CPA experts, as we excel at rendering top-quality accounting and income tax services.

Choose your legal structure wisely

If you own an unincorporated business, you are a sole proprietor, also known as a small business owner. This is common for most people in the United States, accounting for 23 million people. Sole proprietorship taxes are convenient since you only have to report your income, profits or losses, and overhead charges on IRS Form 1040 plus Schedule C. It is strongly advised to choose your business’ tax structure as a sole proprietorship, S corporation (“corp”), C corp or LLC.

Use tax deductions to reduce your taxes

As a small business owner, you have to expand your financial resources! Your business expenses include business travel, business utilities, donations, medical insurance, depreciation, and much more. Luckily, you can claim small business tax reduction benefits to minimize your taxes owed.

Pay taxes in three-month intervals

If you owe taxes of $1,000 or more, you must pay taxes quarterly. However, unlike a salaried person (employee) whose employer withholds some amount of taxes with every paycheck, sole proprietors, freelancers, and small business owners assume the full tax “self-withholding” burden. Also, if you are paying taxes every three months, you don’t have to submit an obscene amount of taxes together at the end of the tax year.

List of business taxes you might have to pay:

• Self-employment tax
• Excise tax
• Sales tax
• Payroll tax
• Property tax

Conclusion

Having an expert accountant by your side can help you throughout your small business’ growth. They can help you avoid common pitfalls that you might overlook. Heed the points mentioned above or hire income tax services for the self-employed and small business owners from Agro Accounting CPA. We can help you with accounting services, tax deduction tactics, and more.

What Happens If You Fail to Pay Your Taxes

The Internal Revenue Service will not let you off the hook if you fail to pay your taxes! You can avoid a situation like this if you pay your taxes timely throughout the year instead of waiting for April 15. Generally, employees have taxes withheld from their salaries. However, freelancers or self-employed people can pay taxes every three months directly to the IRS.

If you need more information on income taxes, consult with the Agro Accounting CPA experts or hire our income tax services for the self-employed. Here, let’s start with the possible outcomes of not paying your taxes on time:

Pay a Penalty Fee

Are you failing to file your taxes or failing to pay your taxes? There’s a huge difference between the two.

If you fail to file your taxes by the due date, there will be a penalty of 5% of the tax owed for up to five months. If you take longer than 60 days after the due date, then you will get hit with a minimum penalty of $210 or 100% of the tax owed, whichever is lower. For example, if the tax owed is $210 or less, the penalty will be the same as the total tax amount due. If the tax amount exceeds $210, the penalty will be at least $210.

Warning Letters from the IRS

Nobody wants mail from the Internal Revenue Service. It's not like the IRS doesn't give you a chance - it gives many. But before taking any strict legal action, they send you a warning letter.

The best thing to do after getting a letter is to reach out to the IRS office. The authorities might look kindly on you as you admit your carelessness, unlike those who have been lining their cat’s litter box with the IRS’ letters. You may get a chance to negotiate a payment plan or even reduce the total tax amount due.

Can’t Apply for a Loan

If you fail to pay your income taxes, you might get into a lot of trouble. You may not be able to apply for a home loan, business loan, or vehicle loan. Banks or lenders need to see copies of your most recent tax returns before giving you a loan. Nobody gives a loan to someone who isn't consistent with filing or paying their tax returns.

The IRS Can Seize Your Property

In Publication 594, the IRS has made it clear that the agency can sell your car or property in order to clear out your outstanding tax in some scenarios. The publication also states that if there is money left after the sale of your property, you will get a refund of it.

To learn more about taxes or to obtain a tax preparation guide for artists and entrepreneurs, feel free to connect with Agro Accounting CPA.

How to Compare the Costs of Different Tax Preparation Options

Almost everyone who is making money in the U.S. has to pay taxes. The thing with taxes is they are a little complex to prepare, calculate, and file. Some people do their taxes by themselves, some people use tax preparation software, and others hire professional accountants or income tax services to prepare their taxes. All of these options are fine. However, each has its own pros and cons, and you have to choose the right option for you. For example, if you are a salaried employee who is earning income from a single source, you need to file your taxes using a W-2 form. There is no need to hire an accounting firm. On the other hand, if you are a freelancer who is earning income from multiple sources and needs to prepare a tax return with itemized deductions, it is a good idea to hire a specialized accountant for freelancers to prepare your tax returns. Similarly, some DIY taxpayers with reasonable knowledge of tax laws can easily prepare their taxes using tax preparation software.

Have a look at the cost comparison of tax preparation under all three options:

1. Hiring an Accountant for Tax Preparation

According to Investopedia, the average cost of hiring a Certified Public Accountant (CPA) to prepare and submit a Form 1040 and State tax return with no itemized deductions is $176, while the average fee for an itemized Form 1040 and a State tax return is $273. If you are a self-employed individual and need to hire a CPA to prepare an itemized Form 1040 with a Schedule C and a State tax return form, the average fee increases to $457. So you can expect to pay $146 to $457 for your tax preparation.

2. Using Accounting Software

The cost to prepare taxes using accounting software varies from $0 to $130. Some accounting software are free but provide only basic features. For complex tax preparation, you need a premium version.

3. DIY Tax Preparation

DIY tax preparation is almost free. It only costs you time! The IRS estimates that individuals will need to spend approximately 11 hours preparing their own returns in 2022.

Which option(s) do you prefer? Let us know in the comments section below.