Every year taxpayers are hit with tax surprises that could be avoided if they just knew the rules. Here are five big ones that are easy to avoid with some simple planning.
Mistake #1. Withholding too little. This results in a tax surprise when filing your income tax. Don’t be too hard on yourself if this happens to you. Social Security withholdings have changed each year and new tax laws make it very difficult to withhold the proper amount from each paycheck.
The plan: Check your withholdings after filing each year’s taxes. Make adjustments as necessary by filing a new W-4 with your employer.
Mistake #2. Inadvertently withdrawing funds from retirement plans. Amounts taken out of pre-tax retirement plans like 401(k)s and IRA’s can create taxable income. The most common inadvertent withdrawal occurs when you roll over funds from one retirement plan to another. If done incorrectly all the rollover could be deemed taxable income.
The plan: Do not touch your retirement accounts if at all possible (Exception: when you reach age 70 ½ you may be subject to Required Minimum Distribution rules). If you do withdraw funds, ensure you have the proper withholdings taken out at time of withdrawal. Direct rollovers into your new plan are always a better alternative than receiving the withdrawal from the plan administrator and then conducting the transfer yourself read more...
What our clients saying about us:
One of the best things about BAS is the "flat fee concept."Knowing the annual payroll, accounting and tax preparation fee in advance allows us to control our cash flow. BAS offers unlimited accounting and tax advice, better planning and most of all..... no surprise additional bills."
Client Name: James Woodworth & Patty Woodworth, Action Wheels Inc., Wenonah, NJ
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