Ways to start your tax strategy for 2020 ... right now

Ways to start your tax strategy for 2020 ... right nowWays to start your tax strategy for 2020 ... right nowIts no ones favorite subject to talk about and if youre self-employed, it might even send shivers down your spine.Tax knowledge isnt a skill set most professionals or entrepreneurs are schooled on in college, however it is one that could leid only set you up for success but save you money, too. President of Westwood Tax Consulting LLC, Josh Zimmelman explains the best time to think about next years taxes is well, right this second.It makes sense to prepare at least a year in advance because if you plan strategically, you can make the most of the new tax laws and make 2020 a fiscally beneficial year, he explains.But as youve likely gathered from your own research and your fluctuating income, everyones tax picture is not only varied, but it changes over time.In addition to hiring a trusted accountant who can explain the jargon to you in a meaningful, digestible way, consider the se recommendations from Zimmelman on how to win bigIf youre a small geschftliches miteinander owner or independent contractorTheres nothing quite as rewarding as branching out on your own- and finding success. Especially when it comes in monetary value that allows you flexibility and personal, professional growth. But while being your own boss is liberating and exciting, it also comes with new responsibilities you likely werent proficient at before. Though a definite learning curve, Zimmelman says there are a few easy ways to get startedSet up a SEP IRAZimmelman explains if you expect to earn a significant income, you should prepare financially to be able to put away the maximum SEP retirement contributions. Have we s-lost you yet? Its not as complicated as it might seem A SEP IRA is a great alternative to a 401(k) for small businesses because it offers many of the same benefits, Zimmelman continues.This allows employers can contribute up to 25 percent of employees salary up to the annual maximum. While he notes the 2020 max isnt available yet but for 2019, it is currently $56,000 and it is expected to go up somewhat with inflation, as it does every year.Consider SEP IRA retirement savingsSo youre a powerhouse party of one? Go you For self-employed and independent contractors who have access to SEP IRAs for retirement savings, its a bit more complicated to calculate the limit. Even so, its worth looking into, according to Zimmelman.The 25 percent of their self employment income has to be calculated after the reduction in income that comes from the SEP contribution and self-employment taxes. So the number ends up being about 20 percent of gross income for many independent contractors, he shares.However, if you expect to earn significant income, you should leise prepare to put away the max in contributions.Think about your business structureWhen you start to build your empire, growth pains will definitely be part of the package. As you expand, Zimmelman suggests giving your business structure a second examination. If you arent already incorporated, your accountant can investigate whether it makes sense to become an LLC, an S or a C corporation. In fact, even if youre an independent contractor, an LLC or a corporation might be beneficialDifferent business entities come with different tax benefits depending on your needs, so make sure youre set up for the most beneficial tax year in 2020, he notes.Plan write-offsThough tax laws have shifted on what can be written off and what cant be lately, Zimmelman says the more you can plan your purchases in advance, the more hard-earned cash you will save.Businesses can write-off the full cost of new equipment and other property- instead of depreciating the expense over a few years. So if youre thinking about investing in your companys growth, you should plan out the years spending now, he explains. Always check with your accountant before making any major purchases though to make sure that your spendin g has a positive impact on your future taxes, instead of a negative one.Set up estimated tax paymentsFun fact (you probably already know) everyone has to pay taxes on income they earn. But when you shift from an employee to owner, the amount you pay shifts, since your employer isnt fronting some of the taxes. This can be a major shock if you arent prepared for it.In order to avoid a big tax bill all at once, some people make estimated tax payments four times a year instead. You can calculate your estimated tax by figuring your expected adjusted gross income, taxable income, deductions, and credits, Zimmelman explains. Most people use their income, deductions, and credits from the previous year as a basis for this estimation. Then you divide the year up into four payment periods.If youre a full-time employeeSo youre happy in your current gig- and not interested in managing every facet of a business. No biggie. There are still ways to brighten your tax bracket. Here, a few to get you startedAdjust your withholdingGot married? Had a baby? Bought a house? Zimmelman says its time to update your withholdings.You can do this by filing a new W-4 with your employer. A marriage, divorce, or new job are all reasons to file a new W-4. If you owed a lot of money at the end of the last tax season, then your withholding might be too low. If you receive a large tax refund, but found yourself struggling paycheck-to-paycheck, your withholding might be too high, he continues.Budget so you can contribute to your 401K moreNot only will this help you now- but it paves the road to the days when you dont have to work nose to the grind anymore. Zimmelman says when at all possible, contribute to your 401k to the max. He says for 2019, the limit increased from $18,500 to $19,000.There is also an additional $6,000 catch-up contribution limit for individuals over 50 years old. If you have a traditional IRA instead of a 401(k) you should still try to contribute the max, because contributio ns are usually tax deductible if they need certain conditions, he adds.Lastly Get organized - and informedNo matter what type of company you have or are part of, the best ways you can set yourself up for tax happiness (or at least, content) is to inform yourself and stay organized.Whether you want to deal with paper or go totally digital, make sure you work out an organization system that works for you, Zimmelman shares. Youll definitely need to keep track your income and expenses, but might also need to set up a phone log or mileage log depending on how you do business.Start the year off right. If you make an effort to stick to your system at the beginning of the year, then you wont have to stress in April looking for receipts and pay stubs. Dont wait until next tax season to look into it. Start now