Latest news with #BridgewaterTaxandFinancialConsulting
Yahoo
14-04-2025
- Business
- Yahoo
Tax Day Countdown: 4 Tax Deductions for Entrepreneurs To Save You Thousands
Filing your taxes can be a killer if you are an entrepreneur, especially considering every profit, loss and all the tax implications in between fall upon your shoulders. Fortunately, deductions are a great way to reduce tax liability or hopefully your overall tax bill in general. Discover More: Find Out: However, knowing what you're eligible for can be tricky whether you are filing your returns through tax software or working with a professional accountant. Instead of combing through endless pages of information on the Internal Revenue Service (IRS) website, it's easier to lean on the knowledge of experts. Check out these four tax deductions that can save you and your business big money come tax time. 'For example, in a sole proprietorship, you will pay self-employment taxes (Social Security and Medicare) on the entire net income, which can be high if the business is profitable,' said John Adams, certified public accountant (CPA), firm owner, tax planning and fractional CFO expert at Bridgewater Tax and Financial Consulting in Jupiter, Florida. 'Self-employment tax has a combined Rate: 15.3% on net earnings up to $176,100 (12.4% Social Security + 2.9% Medicare). Earnings above $176,100 are subject only to the 2.9% Medicare tax, plus the additional 0.9% Medicare tax on earnings exceeding the specified thresholds.' Adams said that if a business is an S-corporation, the entrepreneur must avoid the double taxation of a C-corporation because profits are taxed at the shareholder level, not the corporate level. 'Also, you may benefit because you may benefit from self-employment tax savings,' he continued. 'Shareholders can take a reasonable salary and distributions. Only the salary is subject to self-employment tax, while distributions are not. 'This means if reasonable compensation is $100,000 and you made $176,100, then you can realize a tax benefit on the $76,100 that would not be subject to self-employment tax. This would give you a tax benefit of $11,643 in self-employment taxes saved.' Find Out: Using the example above, Adams said that if you save 10% of your $100,000 in a traditional 401(k), you would be in a 24% tax bracket. 'You would pay tax without a 401(k) of $24,000 and Tax with a 401(k) of $21,600 — a tax savings of $2,400,' he explained. Adams said that if you take advantage of the home office deduction, you may receive deductions for mortgage interest, property taxes, utilities and maintenance. 'These are based on a percentage of your office space and the size of your home,' he said. 'For example, if you live in a 2,000-square-foot home and your office space is 200 square feet, you would get 10% of all eligible expenses. 'If all those expenses added up to $10,000, you would get $1,000. At 24%, this would get you $240.' Crystal Stranger, senior tax director and CEO at Optic Tax Inc., said that one big deduction that many entrepreneurs are unaware of is the Foreign Derived Intangible Income (FDII) deduction. 'This is only available to corporations but reduces the tax rate by 1/3 on sales of most items made outside the US,' she explained. 'So, this can reduce the effective tax rate from the 21% corporate tax rate to 13.125%. 'Sometimes, this alone can make restructuring to a corporation worthwhile, especially if selling intangibles such as software or video game assets as much of those sales are internationally based.' Stranger said there are none yet, but that may quickly change with Trump back in office. 'The Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025, so this will give a lot of pressure to make sweeping tax changes again this year, or in early 2026 in order to extend many of these very popular tax laws,' she explained. 'The biggest issue I normally see is related to the Section §179 Research and Development expenditures,' said Stranger. 'Many entrepreneurs do not realize that any research costs or software development expenditures must be amortized over five years — if done within the U.S. — or 15 years if using an overseas team. This can have a huge impact on tax for startups and can lead to taxable income even when a company has negative cash flow overall, so it needs to be managed carefully by any software development company in the early years of receiving income.' Caitlyn Moorhead contributed to the reporting for this article. More From GOBankingRates 5 Types of Vehicles Retirees Should Stay Away From Buying How Far $750K Plus Social Security Goes in Retirement in Every US Region 4 Things You Should Do if You Want To Retire Early 25 Places To Buy a Home If You Want It To Gain Value This article originally appeared on Tax Day Countdown: 4 Tax Deductions for Entrepreneurs To Save You Thousands Sign in to access your portfolio
Yahoo
08-02-2025
- Business
- Yahoo
6 Benefits To Filing Taxes Early for Retirees
Filing taxes isn't most people's idea of fun, but it's usually better to file early. After all, filing late can lead to some hefty penalties. The failure-to-file penalty is 5% of the taxes owed per month the payment is late (25% maximum). The failure-to-pay penalty is up to 25% of the unpaid taxes. Read More: Find Out: 3 Sneaky Things You Didn't Realize Your Tax Software Was Doing — And How to Stop Them This Year Even retirees should still file a tax return since many types of income are taxable at the federal — and in some cases — state level. And while it's possible to request an extension, as the IRS predicts 19 million taxpayers will do this year, it's generally best to get it out of the way. If you need further convincing, here are the top benefits of filing taxes early as a retiree. Anyone can be the target of fraud or identity theft, with many bad actors specifically going after retirees. Unfortunately, this may become even more prevalent of an issue going forward due in no small part to the National Public Data breach that occurred in 2024. 'In the summer of 2024, the National Public Data (NPD) breach exposed 272 million taxpayer identification numbers (TINs) and 2.9 billion records, including Social Security numbers. It was one of the largest data breaches in history,' said Kevin Knull, CFP and president at TaxStatus. Discover Next: 'One of the most severe consequences of identity theft in the aftermath of the NPD breach is the increased probability of fraudulent tax returns,' Knull continued. 'Criminals can use stolen TINs to file fake and fraudulent returns, often claiming large refunds long before the legitimate taxpayer files and is aware of an issue.' Filing early can help protect you in the face of tax-related fraud and identity theft. 'With this level of threat, the earlier a legitimate return is filed, the less opportunity there is for criminals to submit a fraudulent one in its place,' said Knull. 'It has never been more vital for taxpayers to file taxes as early as possible this year.' Waiting to file also means having to deal with plenty of people with the same idea. If you want to avoid the tax rush, and the headache that often entails, file early. 'One of the things I would say about filing taxes earlier is avoiding the madness of the tax rush,' said John Adams, CPA and fractional CFO expert at Bridgewater Tax and Financial Consulting. 'It is easier for a paid preparer to focus on your taxes earlier in the tax season rather than the rush.' Simply put, filing early gives you more time to figure out what might be missing from your tax return. 'Filing early gives you more time to identify and collect any missing information needed to file your return,' said Mark Luscombe, principal analyst for Wolters Kluwer's Tax and Accounting Division North America. It also gives you the chance to figure out how you're going to pay the taxes you owe, if any. 'Preparing your tax return early gives you more time to calculate the taxes that you owe and to make sure you have the funds available to pay any remaining tax due with the tax return,' said Luscombe. Whether you're living on a fixed income as a retiree, or you have a complicated portfolio, having more time is rarely a bad thing. According to the IRS, the average refund amount is $3,138. But setting the amount itself aside, filing early could mean getting that refund sooner than expected. For retirees who rely on this refund as a part of their regular income, this can be huge. 'If you file your taxes earlier, you are likely to get your refund earlier,' said Jay Zigmont, PhD, CFP and founder of Childfree Wealth. 'Refunds are generally processed in the order received. As we get closer to April 15th, there ends up being a backlog, and refund times tend to lengthen.' Handling your financials in retirement can be complicated. Once you reach a certain age (typically 73 years old), you must also start taking the required minimum distributions from your accounts. Accounts subject to RMDs include traditional IRAs, SIMPLE IRAs, and SEP accounts. 'If you are in the first year of having to make a Required Minimum Distribution, [filing early] will give you more time to plan which accounts to take the money out of and when,' said Adams. When you retire, the last thing you need is more stress of hassle. Filing your taxes early gets them off your plate so you can focus on other things that matter to you. 'Many people, including myself, file their taxes early just to get them out of the way,' said Zigmont. 'No one likes doing their taxes, so why wait and have to worry about it for a longer time?' More From GOBankingRates 4 Low-Risk Ways To Build Your Savings in 2025 3 Things You Must Do When Your Savings Reach $50,000 This article originally appeared on 6 Benefits To Filing Taxes Early for Retirees Sign in to access your portfolio
Yahoo
08-02-2025
- Business
- Yahoo
6 Benefits To Filing Taxes Early for Retirees
Filing taxes isn't most people's idea of fun, but it's usually better to file early. After all, filing late can lead to some hefty penalties. The failure-to-file penalty is 5% of the taxes owed per month the payment is late (25% maximum). The failure-to-pay penalty is up to 25% of the unpaid taxes. Read More: Find Out: 3 Sneaky Things You Didn't Realize Your Tax Software Was Doing — And How to Stop Them This Year Even retirees should still file a tax return since many types of income are taxable at the federal — and in some cases — state level. And while it's possible to request an extension, as the IRS predicts 19 million taxpayers will do this year, it's generally best to get it out of the way. If you need further convincing, here are the top benefits of filing taxes early as a retiree. Anyone can be the target of fraud or identity theft, with many bad actors specifically going after retirees. Unfortunately, this may become even more prevalent of an issue going forward due in no small part to the National Public Data breach that occurred in 2024. 'In the summer of 2024, the National Public Data (NPD) breach exposed 272 million taxpayer identification numbers (TINs) and 2.9 billion records, including Social Security numbers. It was one of the largest data breaches in history,' said Kevin Knull, CFP and president at TaxStatus. Discover Next: 'One of the most severe consequences of identity theft in the aftermath of the NPD breach is the increased probability of fraudulent tax returns,' Knull continued. 'Criminals can use stolen TINs to file fake and fraudulent returns, often claiming large refunds long before the legitimate taxpayer files and is aware of an issue.' Filing early can help protect you in the face of tax-related fraud and identity theft. 'With this level of threat, the earlier a legitimate return is filed, the less opportunity there is for criminals to submit a fraudulent one in its place,' said Knull. 'It has never been more vital for taxpayers to file taxes as early as possible this year.' Waiting to file also means having to deal with plenty of people with the same idea. If you want to avoid the tax rush, and the headache that often entails, file early. 'One of the things I would say about filing taxes earlier is avoiding the madness of the tax rush,' said John Adams, CPA and fractional CFO expert at Bridgewater Tax and Financial Consulting. 'It is easier for a paid preparer to focus on your taxes earlier in the tax season rather than the rush.' Simply put, filing early gives you more time to figure out what might be missing from your tax return. 'Filing early gives you more time to identify and collect any missing information needed to file your return,' said Mark Luscombe, principal analyst for Wolters Kluwer's Tax and Accounting Division North America. It also gives you the chance to figure out how you're going to pay the taxes you owe, if any. 'Preparing your tax return early gives you more time to calculate the taxes that you owe and to make sure you have the funds available to pay any remaining tax due with the tax return,' said Luscombe. Whether you're living on a fixed income as a retiree, or you have a complicated portfolio, having more time is rarely a bad thing. According to the IRS, the average refund amount is $3,138. But setting the amount itself aside, filing early could mean getting that refund sooner than expected. For retirees who rely on this refund as a part of their regular income, this can be huge. 'If you file your taxes earlier, you are likely to get your refund earlier,' said Jay Zigmont, PhD, CFP and founder of Childfree Wealth. 'Refunds are generally processed in the order received. As we get closer to April 15th, there ends up being a backlog, and refund times tend to lengthen.' Handling your financials in retirement can be complicated. Once you reach a certain age (typically 73 years old), you must also start taking the required minimum distributions from your accounts. Accounts subject to RMDs include traditional IRAs, SIMPLE IRAs, and SEP accounts. 'If you are in the first year of having to make a Required Minimum Distribution, [filing early] will give you more time to plan which accounts to take the money out of and when,' said Adams. When you retire, the last thing you need is more stress of hassle. Filing your taxes early gets them off your plate so you can focus on other things that matter to you. 'Many people, including myself, file their taxes early just to get them out of the way,' said Zigmont. 'No one likes doing their taxes, so why wait and have to worry about it for a longer time?' More From GOBankingRates 4 Low-Risk Ways To Build Your Savings in 2025 3 Things You Must Do When Your Savings Reach $50,000 This article originally appeared on 6 Benefits To Filing Taxes Early for Retirees
