Top 7 tips for Self Employed NRIs in the US

Top 7 tips for Self Employed NRIs in the US

by | Aug 9, 2019 | IRS, tax deductions, tax filing, Tax Planning, Tax Refund, tax savings, taxes

Top 7 tips for Self Employed NRIs in the US

The person sitting next to you on your flight could be running a small-scale successful business. Working parents now choose to work from home more often than not. The changes in the landscape of career options have been vast over the past few years. Thus, it is no secret that more and more people are willing to take risks and explore more career options that are not only better paying but fulfilling as well. If you are an individual who wants to explore self-employment or are an NRI who wishes to look for self-employment options, you also need to be aware of how taxes work. Here are the top 7 tips, self-employed NRIs which will help you make the most of taxes.

Proper Research

The first step to successful tax filing begins with proper research. Do you due diligence in finding out the total income for a fiscal year. You would also want to be aware of the list of deductions applicable for you. You must also be aware of the deadlines by which you must file your taxes and start acting accordingly. For instance, if your self-employment income exceeds INR 400 for a fiscal year, you are required to file your taxes.

Status

Self-employment doesn’t necessarily mean that you ought to have a company or firm registered to your name or even the income doesn’t have to be your primary source. Given the vast landscape, you could have a primary job and work on your passion over the weekends and earn some money out of it. It is essential that you report all such incomes in your tax returns.

Proper Documents

While preparing for tax returns, having all the relevant documents will help you save a considerable amount of time as well as confusion. From the beginning of a fiscal year, ensure that you keep all the receipts for expenses that you wish to claim, relevant forms, rent bills or mortgage bills if you work from home etc. in a separate folder. Documents such as Form 1099-K or 1099-Misc might also be needed. Having them at a single place will ensure that you have a smooth tax filing process.

Tax Estimations

If you are work for an organization, they take care of withholding applicable taxes before crediting your salary. However, for self-employed individuals, things are a bit different. Since there aren’t any fixed sources of income, you out to estimate your taxes and pay them on a quarterly basis. For the current year, if your tax bill is more than $1,000 you will have to pay estimated taxes.

Work-Related Expenses

The IRS allows individuals to claim deductions on a number of work-related expenses. For example, if you bought a computer or a laptop for your work, you can claim the amount as deduction. You can even claim expenses for driving down to meet a client for business purpose. Keeping a track of such expenses will help you tackle the tax return process in a better way.

Required Forms

Self-employed individuals usually document their income in Schedule C along with any profit or loss of the business. If you own a business with simple earning structure, you would need to file Schedule C-EZ. Thus, understanding the right form depending on your self-employment type is essential.

Tax-Tools

If the tax filing and return process seems overwhelming, you can take the help of several tax tools available. You would only have to provide the essential information, post which the tools will take care of the rest.

Self-employed individuals can use the above tips to handle taxes or overcome tax phobia in a much better way.

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

by | Jul 26, 2019 | IRA, tax deductions, Tax Extension, Tax Planning, Tax Preparation, Tax Refund, tax savings, taxes

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Should I start investing for my retirement? When is the right time to start my retirement planning? These are some of the questions that a lot of us ponder over. And in the process of just thinking and not acting, we miss out on some crucial investments.If you have received some tax refunds, instead of spending it away, it is worth investing it for your retirement corpus. Today is the right time for you to start planning for your retirement. Here are some important tips that will help you build your retirement corpus.

401(K)                                             

This might seem very obvious, yet a lot of taxpayers forget to exercise this option. If your employer offers a traditional 401(K) plan and you have the right eligibility, do not shy away from it. What makes this option interesting is that your investment is pre-tax. In simple words, the amount will be deducted even before any tax is calculated on your income. This allows you to make the most of it and invest more. Some employers offer Roth 401(K), which essentially deducts the amount after taxes have been calculated. Consider the tax bracket that you might retire in and choose a plan accordingly.

Catch-Up Contributions

Since there is a cap on the amount that you can contribute towards 401(K) for a fiscal year, it is recommended to start early with your retirement plans. However, it all changes as soon as you reach 50 years. The restrictions on the amount that you can invest are no more valid, thus you can invest more for your retirement. If you have missed out on some payments in the past, this is the time to do the catch-up.

IRA

The IRA or the Individual Retirement Account is another way by which you can invest for your retirement. You can either choose between a traditional IRA or Roth IRA. The Traditional IRA can be beneficial depending on whether you and your spouse have retirement plans in place from your employer. Based on your tax eligibility the contributions can e tax deductible and your funds will grow tax-free until you withdraw the funds. Roth IRA makes for a good choice if you qualify for phased out income limits. The investments are tax free if you reach 59 and a half years.

Match your employer

If you work for an employer that offers 401(K) it might be worth matching their contributions. Your employer can invest as much as 50% of your contributions, up to a maximum of 5% of your salary. Thus, if you are taking home $60,000 a year, you can contribute $3,000 for your 401(K). Your employer will have to contribute another $1,500. You would not want to miss out on this amount.

Automatic savings

Another smart way of ensuring that you save and money on a regular basis for your retirement is to set up automatic monthly contributions. This will save you from putting in efforts on a monthly basis and get your contributions some discipline. You can reach out to your bank to see the available options to invest automatically on a monthly basis towards your retirement funds.

If you have received any funds as income tax refunds, retirement investment is one of the smartest things that you can do with those funds. There are enough options available for you to either enhance your existing contributions or start fresh if you have not already. Individuals who haven’t yet started, you can start today and make the most of the different options available.

 

How AOTAX helps you get the best Tax Refunds in 2019?

How AOTAX helps you get the best Tax Refunds in 2019?

by | Jun 28, 2019 | tax deductions, tax filing, Tax Planning, Tax Refund, taxes

How AOTAX helps you get the best Tax Refunds in 2019?

Hoping to pay minimal taxes is no crime. Afterall, why should you pay more taxes than you owe to Uncle Sam? If due to some reasons you have overpaid your taxes, tax refunds will help you get the amount back. There are several ways by which you can boost your tax refunds. And at AOTax, we ensure that you have access to some of the best ways to achieve the same.

Smarter Tax Deductions

Not many tax payers are aware of the fact that the miles that you put on your car for charitable donations or even medical purposes, you can claim them as deductions. While the miles that you drive for medical purposes is subject to the AGI threshold, it is calculated at 18 cents per mile. Similarly, miles accumulated for charitable donations is calculated at 14 cents per mile. If you drive about 50-60 miles a week for charity, that accumulates to $450-500 additional deductions.

Of course, it is a good habit to keep track and record of such transactions. Simple details such as the date, purpose, donations made, or market value of any goods that you have donated, would help you while filing taxes.

IRA and HSA contributions

While a lot of taxpayers are aware of IRA or even HSA contributions, there are a few tricks that you can try. For example, did you know that you can contribute for traditional IRA for the previous year during the current financial year? This means, you can make contributions towards your IRA for 2019, till 15th April 2020. This allows you to claim for deductions for the tax filing of 2019.

If you aren’t already aware, the IRA will reduce your taxable income and thereby the taxes that you owe to the government. If you are 50 years or older, you can make use of catch-up provision to contribute towards IRA. And even though they both quality for deductions, if you qualify you can receive Saver’s credit as well.

Tax Filing Status

Choosing a filing status is one of the first steps to filing your tax returns. And it can affect your tax refund significantly. This is even more significant if you are married. Statistics show that 96% of married couples file their taxes together. Though that is the norm, it isn’t always the most beneficial route selected. Opting for married and filing separately as a status does require some additional effort on your part. However, you can save a considerable amount of money in the form of taxes or even refunds.

For starters, when you opt to file taxes separately, each spouse gets a lower AGI or Adjusted Gross Income. When you file your taxes separately, the Child Tax credit is available for both spouses to avail. Separately calculating taxes will result in higher refunds when it comes to education. At AOTax, we can help you with different calculations and help you get a higher refund as well.

Taxpayers who are not married, can use the filing status as head of the family rather than unmarried. This will allow taxpayers to avail a higher standard deduction as compared to filing as unmarried individuals. Having a dependent parent or child will allow you to benefit from better deductions.

Timing your tax returns properly will also enhance your chances of getting better tax refunds. The easier way to handle such situation is to take help of the expert services at AO Tax. With various services on offer, you can always find help that you are looking for and be stress free about your tax returns.

How to save taxes in 3 ways this summer?

How to save taxes in 3 ways this summer?

by | Jun 14, 2019 | tax deductions, Tax Planning, Tax Preparation, tax savings, taxes

How to save taxes in 3 ways this summer?

We are surrounded with a few mundane tasks that we must carry out, irrespective of we like them or not. Tax planning is a prime example of the same.  though it is mundane and even borderline boring, it must be done. However, there is an upside to it. If you successfully plan your taxes, you can save a considerable amount of money. If that isn’t a good enough reason to plan for your taxes, nothing else will.

But where do you start from and how do you plan your taxes? To make matters easy for you, here are the top 3 tips by which you can save money on taxes this summer. If you do not want to pay extra to Uncle Sam, the following tips are for you.

Health Savings Account (HSA)

If your employer offers any health insurance plan, you can combine your health savings account along with it. In the event that your employer does not offer any health insurance plans, you can buy a health savings account on your own. The money that you put into a health savings account is pre-tax. You can then use the amount for various expenses such as medical bill for procedures, co-payment, deductibles and even certain expenses that are not covered as a part of medical insurance such as dental care or vision.

Your contributions towards HSA has several tax benefits. For starters, it is deducted pre-tax, the amount that you contribute is non-taxable. The amount that you invest then keeps on growing tax-deferred. And lastly, when you do withdraw the amount it is tax-free.

Flexible Savings Account

A flexile savings account is another smart way of handling your taxes. On the surface, it resembles the Health Savings Account to a great extent. The major difference being, that a flexible savings account is sponsored by employers only for healthcare plans. Per year, you can invest as much as $2,250 pre-tax. You can then use the amount for taking care of expenses such as deductibles. And, you do not have to pay anything on the $2,250, no state taxes or no federal taxes.

Unlike the HSA, you do not get the amount directly. And you must spend the amount by the end of the year. If you fail to do so, the amount will revert to your employer. Though, some companies now offer grace periods where you can use the funds. And in some cases, you can carry forward up to $550 for the next year.

Charitable Donations

When it comes to charitable donations, there aren’t a lot of restrictions. If you wish to donate a significant amount of money to charity, you can consider giving away your stocks or even mutual funds. Specifically, the ones that you have had with yourself for at least a year. Should you consider this option seriously, it is recommended to give away the stocks or mutual funds that are in the green or yielding profit. Charitable donations always consider the fair market value on the day of donation and not at which it was bought. This will boost your donations considerably. This will allow you to quietly walk away without having to pay taxes on your profits. To make the most of this method, you would have to itemize your deductions. But if your stocks or mutual funds are in loss, it is better to sell them off, claim the loses and donate separately.

The above methods will help you save money on taxes considerably. Which you can then spend on doing whatever you wish or invest for better returns in the future.

Top #10 reasons to file your taxes every year

Top #10 reasons to file your taxes every year

by | Mar 23, 2019 | income tax, tax deductions, Tax Planning, Tax Preparation, tax savings

Top #10 reasons to file your taxes every year

It is a common tendency for all of you to wait until April to file your taxes. While it is all fine as long as you file taxes, the earlier you do the better it is. Gone are the days when filing taxes was a difficult and tedious job.

Every year about 10 million taxpayers end up paying $130 on average for estimated tax penalties. Thus, filing and paying your taxes every year on time will help you avoid such penalties.

With several government initiatives and tools in place, it is easier to get through tax filing these days. Here are the top reasons why you should consider filing your taxes every year and at the earliest.

Faster Processing

It is advisable that you do not file close to the deadline. It only delays the processing and in turn, results in slowing down the entire process. You might also run into the risk of submitting while the servers are under heavy load, further slowing down the process. The file at the earliest for faster processing of returns.

Proper Documentation

While the complexity of filing returns has come down by a considerable margin, it is far from ideal. One can still get overwhelmed by the entire process. It is recommended that you start early so as to figure out of there are any additional documents that you might need to submit.

Faster Refunds

Taxpayers who file their taxes earlier are more likely to receive their entitled returns early. Since you file early, there won’t be too many returns for the IRS staff to go through or process. And thus, they can complete them at the earliest.

Additional Time to Pay Taxes

Filing your taxes early will help you determine the amount that you have to pay to Uncle Sam. It must be noted that even though you can file your returns earlier, you do not actually have to pay any taxes till the 15th April deadline. This will allow you to plan your taxes better.

Avoid Extension

There are certain circumstances, where requesting an extension for your taxes is much needed. Consider this, a person was carrying all their tax documents to the office and they get stolen on the way. Or a person lost his/her house to fire, burning down all the documents in there. These are legitimate reasons for filing an extension. Others, not so much. Instead of opting for extension and slowing down the process, it is better to get it done at the earliest.

Better Help

If you need the services of any tax agents, the most reputed ones will most likely be booked closer to the deadlines. In the event that you file your taxes earlier, you can seek professional help without having to wait.

Financial Help

If you are looking to utilize the FAFSA or Free Application for Federal Student Aid either for yourself or for someone else in your family, it is recommended to do it at the earliest. The earlier you file your taxes, the better are your chances of receiving the maximum amount out of it. The aid is dependent on the most recently filed return.

Identity Theft

Every year a lot of taxpayers are victims of tax fraud. In the year 2014, about 3 million people reported the same. It usually takes place if you wait till the end to file your taxes.

Clear Things up

Filing taxes earlier gives you ample time to fix if something is wrong with your taxes. This is one of the simplest and most straight forward benefits of filing your taxes every year and on time.

Buying a House

Your mortgage provider would want to have a ton of supporting documents from your end. These include W2 form, bank statements, tax returns and so on. Thus another added advantage of filing your taxes every year.

5 Reasons why you should Outsource your Book Keeping and Payroll

5 Reasons why you should Outsource your Book Keeping and Payroll

by | Mar 11, 2019 | Book keeping, payroll, tax deductions, Tax Preparation

5 Reasons why you should OUTSOURCE your Book Keeping and Payroll

For any successful business, it doesn’t take a lot of time to understand and realize that accurate financial records is of paramount importance. And book Keeping isn’t all that easy or straight forward. It requires a good amount of proper skills and a lot of time.

The lack of proper bookkeeping, your business might be prone to a lot of risks, inconsistency in business, might result in falling revenues and so on. You might even run into the risk of internal fraud. Thus, outsourcing your bookkeeping and payroll might be the best possible solution.

Here are some prominent reasons why you should consider it.

Save Time

A company’s management team usually has a lot of tasks on their hand. On top of that, adding the pressure of bookkeeping is not advisable.

  • Bookkeeping can add a lot of unwanted pressure and leave less time for management to work on important issues.
  • Outsourcing will help your company to clean up all that time so that you can utilize the time in more prudent issues and concerns or focus on growth.

Reduce Costs

When you opt for outsourcing your bookkeeping and payroll, cost reduction is one of the significant benefits.

  • In the initial days, it might look like it is increasing the cost but in the long run, it will save a lot of money.
  • Bookkeepers are usually experts and have a lot of knowledge when it comes to tax regulations.
  • Along with services that eliminate the chances of errors you will also benefit from better tax cuts and benefits.
  • Also, you will end up saving money in terms of hiring full-time resources, dedicated office space etc.

Better Tax Management

Bookkeepers are experts in their fields. It should not come as a surprise that they have a lot of grasp on taxation laws and regulations.

  • Hiring them would ensure that you get most of the exemptions and deductions.
  • Thereby enabling you to save more money.
  • Another benefit is error-free tax filing for your company.

Consultation

One of the major benefits of outsourcing your bookkeeping and payroll management is better budgeting.

  • Outsourcing to experts also beings in better forecasting for the future.
  • Unlike internal employees, outsourcing firms will provide you with unbiased reports and opinions in fields like future success, financial analysis, taxation, stability of business and so on.
  • Outsourcing companies might also offer advice and strategic plansto further improve the business.
  • More importantly, book keepers ensure that creditors and vendors are paid on time, which elevates your position in the market.

Better Technology

Having access to the latest technology in book keeping and payroll can be an expensive affair for small scale or medium scale companies.

  • Taking the help of outsourcing will help you have access to the latest technology.
  • It includes better software/database, enhanced procedures, latest operational changes, best practices and so on.
  • And of course, the security levels on offer are quite high along with sufficient privacy and backups for the worst-case scenario.

There are a lot of perks of outsourcing your book keeping and payroll. This can come in handy if you are a growing business entity. After a certain threshold, it will be a bit more difficult to handle all the payments, receipts, settlements, vendors, creditors, maintain records of all and so on.

Outsourcing is a seamless and hassle-free way of handling such situations with breeze and needless to say, the entire endeavor is cost-effective as well. If you haven’t already, consider outsourcing your book keeping and payroll management.