As we leap forward into the 2024 tax filing season, both businesses and individuals must stay informed and be prepared.Here are some tips that can help you reduce your tax liability.Tips for businesses: Organize financial recordsCompile all records of income, including sales receipts, bank deposits, and any other revenue sources.Maintain detailed records of all business […]
Get Instant Access to This Article
Subscribe to Hartford Business Journal and get immediate access to all of our subscriber-only content and much more.
- Critical Hartford and Connecticut business news updated daily.
- Immediate access to all subscriber-only content on our website.
- Bi-weekly print or digital editions of our award-winning publication.
- Special bonus issues like the Hartford Book of Lists.
- Exclusive ticket prize draws for our in-person events.
Click here to purchase a paywall bypass link for this article
As we leap forward into the 2024 tax filing season, both businesses and individuals must stay informed and be prepared.
Here are some tips that can help you reduce your tax liability.
Tips for businesses: Organize financial records
Compile all records of income, including sales receipts, bank deposits, and any other revenue sources.
Maintain detailed records of all business expenses, such as rent and utilities, payroll, office supplies, mileage and travel expenses and advertising.
Consider depreciation
Review any fixed assets acquired during the year. Think of equipment, furniture and vehicles for potential depreciation deductions.
Depending on the type of asset, your business may be eligible for a full write-off.
Book-to-tax differences
If your financial records are on a book basis, be aware of potential temporary or permanent differences for your tax returns.
Common differences include depreciation, accrued payroll and expenses, meals and entertainment expenses.
State filings
If your business operates across state borders, you might need to file and pay tax in more than just your home state.
It’s important to document the allocation of sales, payroll and fixed assets by jurisdiction.
Deadlines and extensions
Mark relevant dates on your calendar: March 17 is the tax deadline for partnerships and S corporations; April 15 is the deadline for individuals and C corporations.
If you need more time to file your returns, you can file for a six-month extension. Note that an extension applies only to filing returns; payment of tax still must be made in full by the initial due date.
If you cannot pay your taxes in full, explore your options for payment plans with the IRS to limit penalties and interest.
Stay organized
Maintain a well-organized filing system for your tax documents to simplify the process and be prepared for potential audits down the road. Communicate with your tax advisor early to understand timing and cover questions.
Tips for individuals: Gather necessary documents
A wise first step would be to compile as much relevant documentation as you can. This includes:
- W-2 forms from your employer(s);
- 1099 forms from your investment advisor(s);
- K-1s from any flow-through investments;
- Records of any other income or expenditures, such as rental properties or contract work.
A great reference point is last year. If things are similar, you may just need to gather the same documents you had in 2023.
Try to think of anything new for this year: Did you open a CD? Is this the first year you withdrew from an IRA? Those are just a couple examples to get you thinking.
Maximize deductions
A big variable for many individuals is whether they will utilize the standard deduction, or itemize their deductions on Schedule A.
The standard deduction ranges from $14,600 for single filers up to $29,200 for married taxpayers filing jointly. Some individuals, however, can benefit greatly from itemizing instead.
There are several sources of itemized deductions, including: Medical expenses (exceeding 7.5% of your adjusted gross income; property and state taxes paid ($10,000 maximum); charitable donations, mortgage interest, and casualty losses.
If you believe the sum of these expenditures could exceed your standard deduction, it would be wise to consider itemizing.
Although 2024 has passed, there are potential moves you can make to reduce your taxable income between now and the filing deadline.
One option is to contribute up to $7,000 ($8,000 for those 50-plus) to a traditional IRA. Or, if you are enrolled in an eligible high-deductible health insurance plan, you can contribute to a Health Savings Account (HSA) – between $4,150 and $9,300, depending on your age and filing status.
Maximize credits
Take advantage of the numerous available tax credits, including:
- Higher-education credits;
- Child and earned income tax credits;
- Child and dependent care credit;
- Residential energy and electric vehicle credits.
Steven Maffiolini is a manager at accounting and consulting firm CLA. He is based in the firm’s West Hartford office.
