Are you trying to save money on your next tax bill? With year-end quickly approaching, now is the time to revisit your tax situation. Maybe your Shopify storefront was more profitable this year or you finally decided to open your Amazon FBA business.
Even if you haven’t ventured into the ecommerce realm, you should still understand your taxes before the year closes out. In this article, we’ll explore 10 tax tips to help you maximize your refund going into the next filing season.
Tax Tip #1: Defer Income
If you are expecting a year-end bonus or are planning on selling any type of investment, consider deferring the income to the following year. Extra income can potentially bump you up into another tax bracket, but by deferring the income, you won’t pay taxes on the amounts until the following year. Talk with an Amazon FBA CPA to plan out your ecommerce income.
Tax Tip #2: Utilize Your FSA
A Flexible Spending Account provides funds for doctor visits and other medical expenses. Most plans limit the amount you can carry over to the next year. To maximize your tax benefits, utilize all of the funds in your FSA account before the end of the year.
Tax Tip #3: Understand the Other Dependent Credit
Most people know about child credits, but did you know you can claim a credit if you support your parents or grandparents? Non-child dependents might qualify for the Other Dependent Credit, which can be worth up to $500 off your tax bill.
Tax Tip #4: Take Continuing Education Courses
Continuing education opens the door to exclusive tax credits and might be a qualifying business deduction. The Lifetime Learning Credit provides a credit of up to $2,000 for qualifying education courses. However, even if you don’t qualify for the Lifetime Learning Credit, you can include the cost of the course in your qualifying business expenses if they are related to growing your knowledge as a business owner.
Tax Tip #5: Accelerate Deductions
Unlike income, you should try and accelerate deductions. Are there extra deductions you can take when completing your Shopify accounting? Maybe you accrue expenses that are expected to be paid shortly after year-end. To pinpoint which deductions you can accelerate, reach out to an ecommerce CPA.
Tax Tip #6: Time Investment Sales
Investment sales can drive up the amount of capital gain taxes you pay on your return. Consider timing investment sales, whether that be deferring large gains until the next year or using harvesting. Harvesting is the process of selling investments at a loss to offset large gains, reducing your overall tax burden. If you plan on selling business equipment, reach out to an ecommerce CPA to understand your potential tax implications.
Tax Tip #7: Maximize Retirement Contributions
Certain retirement contributions are made on a pre-tax basis. If you choose to contribute to a normal 401(k), the amounts will be tax-free. However, even Roth contributions can give way to a tax deduction. Additionally, entrepreneurs and ecommerce sellers can also take advantage of self-employed retirement plans, like a SEP IRA. To see if you qualify for a SEP IRA, contact a CPA for Amazon sellers or a Shopify tax accountant today.
Tax Tip #8: Contribute to Charity
Contributions to charitable organizations do give way to a tax deduction. Do you have obsolete or slow-moving goods in your business that you can donate? How about old household goods lying around? Donations to charity don’t always need to be cash. In fact, you can donate almost any type of inventory or other business property. The deduction will be the fair market value, which your Shopify CPA or Amazon accountant can help you determine.
Tax Tip #9: Take Advantage of Green Tax Incentives
Over the past few years, there have been numerous green tax incentives for vehicles and energy-efficient home upgrades. If you purchased a new car or made improvements to your home, double-check if you qualify for green tax incentives. Furthermore, if you have any of these components run through your business, you might qualify for other tax incentives. Your ecommerce CPA can help you determine the green credits and deductions you can take.
Tax Tip #10: Consider W-4 Withholding Allowance Adjustments
When you started your job as an employee, you most likely set your W-4 withholding amounts, which dictates how much taxes you pay from your paycheck. If you have a major life change, like adding a child to your family, getting married, or accepting pay chances, you should readjust your W-4 withholdings to better match your tax situation.
Summary
Which of these tax tips can you take advantage of? Ensuring you claim all of the credits and deductions you are eligible for, especially as an ecommerce business owner, relies on having the right professional working alongside you. Reach out to one of our ecommerce CPAs today to see how we can help you save money on your next tax return.
