5 tax resolutions for 2012
Pay attention to detail, weigh tax consequences of contracts, beware of independent contractor woes and answer IRS queries quickly.
This post is from Robert W. Wood at Forbes.com.
"I will pay less tax" might sound like a good New Year’s resolution. But resolutions should be manageable and concrete. Here are five that shouldn’t be hard to keep but could make a difference in your tax posture this year.
Pay attention to every Form 1099. These are important slips of paper and their importance is increasing. It’s almost time for the ubiquitous tax reports to show up in your mail, so get ready. See "10 things you should know about 1099s." Each one bears your Social Security Number and is matched to your tax return. Pay attention to these forms. They really count.
Consider taxes before signing agreements. Most agreements you sign in business have a tax angle, and many in your personal life do, too. Settlement agreements resolving litigation are a good example but there are many others. A purchase agreement for a company, a lease agreement for office space, an option agreement to buy property or a license agreement allowing use of your property all can have a tax impact. Consider taxes before signing, since that’s when you can still effect changes.
Consider taxes before hiring an "independent contractor." Few consumers consider whether a plumber doing a one-time task is an employee or independent contractor. But if you’re in business and have continuing relationships with workers you pay without withholding taxes, consider whether that will stand up. 2012 could be a big year for reform.
Keep good records. Few people like keeping tax records. It can be difficult to keep a copy of each signed contract, lease, invoice, receipt, check transmittal and the like. But good records make any tax matter, whether it’s simply tax compliance or a tax controversy, vastly easier.
Deal With Tax Notices Promptly. Many tax lawyers and accountants earn larger fees because clients tend not to deal with things promptly. Often, tax professionals could achieve a better result if they were brought in earlier. To take an extreme example, if you fail to respond to an IRS 90-day letter and miss the deadline, it’s no longer possible to go to Tax Court. Instead, you’ll need to file a refund claim and then go to District Court or Claims Court.
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