As we approach the tax season of 2025, it is crucial for individuals and businesses to arm themselves with knowledge and strategies to navigate the complexities of tax filing and planning. Mark Baird of GRS Accounting Solutions discusses common pitfalls, the nuances of deductions, and key strategies for maximizing tax efficiency.
**Common Mistakes in Tax Filing**
Mark identifies miscalculating taxes when withdrawing from 401(k) plans as a prevalent error. Financial institutions often recommend withholding 20% for federal taxes, but many overlook an additional 5% state tax and a potential 10% penalty for early withdrawals. This oversight can result in receiving only 65% of total proceeds, prompting some to reconsider their withdrawal decisions. Discussing withdrawal reasons with a tax preparer can provide clarity and help avoid penalties.
**Maximizing Deductions and Credits**
To reduce tax liability, taxpayers should keep meticulous records, especially if they own side businesses. A common oversight is underestimating mileage; using apps to track miles can ensure accurate claims. Health insurance premiums can be itemized on Schedule A, helping taxpayers exceed the standard deduction threshold. Understanding specific deductions for business owners and how to categorize expenses is vital for optimizing tax returns.
**Key Deadlines and Tax Structures**
Mark emphasizes that tax deadlines are critical, with S Corporation and Partnership returns due by March 15, and personal and corporate tax returns by April 15. Extensions are available but do not eliminate potential penalties or interest on owed taxes. Understanding the difference between standard and itemized deductions is essential; the standard deduction offers a straightforward reduction in taxable income, while itemized deductions require detailed accounting of eligible expenses, such as medical costs and mortgage interest.
**Advice for Small Business Owners**
For small business owners, proactive tax planning is essential. Regular consultations with tax advisors can help identify deductible expenses and streamline record-keeping processes. “Simple tools, such as spreadsheets or financial software like Quicken, can assist in tracking income and expenses effectively,” he notes.
**Preparing for Audits**
Receiving an audit notice can be daunting, but most audits are conducted via letter rather than in-person visits. Taxpayers should gather the requested documentation and avoid providing unnecessary additional information. Ignoring audit letters can lead to complications, making it imperative to maintain open communication with tax preparers.
**The Value of Tax Professionals**
Mark highlights that working with a tax professional can yield significant benefits compared to filing independently with software. “Professionals provide tailored advice and insights that help taxpayers navigate complex tax situations. Engaging with a tax advisor before the end of the year can lay the groundwork for strategic planning,” he underscores.
**Impact of Recent Tax Law Changes**
Looking ahead to 2025, Mark believes taxpayers should remain vigilant about potential changes in tax legislation. With many existing rules set to sunset, individuals may find themselves filing more on Schedule A and potentially foregoing the standard deduction. Staying informed about these developments is crucial for effective tax planning.
**Year-Round Tax-Saving Strategies**
Mark shares that tax-saving strategies should extend beyond tax season. Contributing to retirement plans, especially those with employer matching, can significantly reduce taxable income while providing a solid return on investment. “Regularly reviewing tax situations, especially after life changes, ensures that taxpayers remain prepared and informed,” says Mark.
**Resources for Tax Information**
For taxpayers seeking guidance, consulting with a tax professional is invaluable. While the internet offers a wealth of information, it can also lead to misinformation that complicates tax situations. Trusted resources, particularly those from the IRS, are vital for accurate information.
In conclusion, as we enter the tax season of 2025, Mark emphasizes the importance of understanding critical aspects of tax filing and planning for ensuring compliance and maximizing financial benefits. By staying informed, organized, and proactive, we can navigate the complexities of the tax landscape with confidence. To contact Mark for more information or to book an appointment, please visit his website at https://grsaccountingsolutions.com or call (804) 823-5501.