Stick it to the Man

We all know that word that should be illegal...TAXES.  That's right, it's time to hand our hard earned dollars over to the man yet again.  April 15th is just around the corner believe it or not.  As is the case every year, clients, friends, family members call me with questions on how to save money, how to report tax items correctly and "Gasp", how to decrease what TurboTax is telling them that they owe Uncle Sam.  One thing that is often misunderstood about a tax accountant is that we are not miracle workers.  The numbers are what they are.  True, we may be well aware of tricks, tips and tax law facts that can help you minimize tax liabilities and assure that the IRS won't come knocking at your door, but we cannot erase the fact that you made decent money and have to adhere to the 16th amendment and pay it back.  Shocking as it may be, it's the truth.  So here are a few basic tips that I share with those who approach me with tax saving questions:

1.  Save your receipts.

This may seem like a waste of time when expenses are minimal, but any business owner should know that small expenses may in fact be business expenses, not just spent dollars that will never be seen again.  The rule of thumb is this, save your receipts for at least 10 years. Yes, TEN years.  Why?  Because that is the statute of limitations on how long the IRS can audit you and possibly collect back taxes.  Should the IRS come knocking on your door 10years down the road, you can hand them that box you have had stored in the garage full of receipts and tell them to "have a ball".  That my friends, is how you Stick it to the Man.

2.  Keep personal business separate from actual business.

It's a simple rule that many tend to forget.  If you are a business owner, keep a separate bank account for that business.  Get a separate credit card/debit card associated with your business bank account and DO NOT run personal expenses through that account.  Your personal bank account is just that, personal.  You wouldn't want your financial advisor sending you a bill a bill for his dry cleaning right?  Again, should the IRS ever audit your business, you can hand them your business bank statements along with any receipts you have stashed away (see tip #1) and stick it to them.

3.  When in doubt, call your tax advisor.

If you are unsure of whether an expense qualifies as a business expense, call your tax advisor or someone you know that has a background in tax law.  Not only will their advice help you sleep better at night, it may also save you a lot of money in tax return preparation fees come tax time when that same accountant has to sift through your business expense records and pull out a gazillion expenses that are not tax deductible.  Time is money, so spend two minutes asking the question rather than $200 paying someone to fix your mistakes or worse yet, having the man stick it to you with a big fat bill stating you owe additional money in taxes.

4.  Use direct deposit whenever possible.

If you are receiving a refund, elect to have the IRS deposit the refund directly into your checking or savings account.  This can be done by simply including your bank account and routing number on the second page of your Form 1040.  Your refund be deposited into your account at least twice as fast as it would if you waited for the IRS to send you a paper check.

5.  Do NOT pay your tax liability by direct withdrawal.

People, please tell me if you really think it wise to check that box that permits the IRS to withdraw money from your bank account in order to pay your current year tax liability.  Believe it or not, that box that you just checked actually says, "Yes, please take my money out of my bank account to pay for my taxes and then go ahead and give yourself a fat tip on top of that by finding mistakes on my return and charging me more money than I intended to pay you in the first place."  Use some common sense and take a few extra minutes to write that check and put it in the mail.  It will end up costing you your tax liability, plus 44 cents for the stamp on the envelope rather than the extra money the IRS decides to withdraw from your account.

And last, but not least...

6.  Suck it up and get it done.

The longer you wait to file your taxes the longer you wait to get your refund.  If you are one of those procrastinators and wait until April 15th to file your taxes, don't expect to see that refund for at least a month.  The population of last minute filers are sending their tax returns to a group of people about 1/16th its size.  Hence, the wait will be long and possibly very painful if you are relying on that refund money to bail you out of your credit card debt from your most recent impulse purchase.

So while some of these tips may seem like no brainers and others may seem annoying, keep them locked in that memory bank if you can.  If you do, you may just be that person who one day gets to say:  "Guess what I did today?  That's right...I stuck it to the man."