The time to prepare for small business taxes is long before tax day arrives in April. The beginning of the year is a busy time— hopefully you’ve managed saved time by setting up automatic payments for key business needs like small business insurance. Although you may be busy with hectic business tasks and other responsibilities, it pays to make your taxes a priority.
Here are four tips from CAN Capital to get you started on your taxes for this year:
1. Leverage tax prep tools
There are plenty of resources available to help you figure out which records and information to gather, understand tax guidelines for your business, and complete your filings on time. A tax organizer or worksheet can make organizing your information easier. A number of accounting firms offer such forms to their clients, or you can download them for free from various websites. For instance, Anderson Advisors offers a number of downloadable tax organizers for each type of business entity. Several websites also offer automatic tax calculator apps to help you determine how much you’ll owe Uncle Sam. Bankrate, for example, has a whole slew of online calculators available.
Many of the well-known, easy-to-use personal income tax software programs offer business tax options as well. Consider the small business applications available from TaxAct, TurboTax, and H&R Block. And always remember that the IRS offers a wealth of information and resources for filing small business taxes. On the website, you can find small business tax forms, instructions for taking allowable deductions such as the home office deduction, and an array of additional information and resources in the IRS Small Business Tax Center.
2. Avoid common mistakes
Small business owners often make many of the same mistakes when it comes to filing taxes. One common mistake is turning all responsibility over to your tax professional. Many small business owners hand off all their tax information to a CPA and “assume that because their taxes were done by a professional, that they have nothing to worry about,” says Maggie Mayer, CPA, owner of Mayer & Associates, an accounting firm in Madison, Connecticut. “You, as a business owner, not your tax preparer, are fully responsible for the information presented on the tax return.” Mayer recommends reviewing your return thoroughly, asking questions and making sure you feel fully comfortable with the information being presented on your tax return.
Another common mistake is not taking legitimate deductions. Some business owners let their fear of the IRS keep them from taking deductions, which leads them to pay more in taxes than they owe. “Every year I have to convince clients that it is okay to write certain things off that they are entitled to,” Mayer says. “If the deduction is valid, and you can substantiate it, you should take advantage of it.”
3. Make a checklist
It’s crucial to make sure that you’re not overlooking anything with your taxes — mistakes in even the smallest details can cost you time and money. Use a checklist to make sure your business is tax-ready and you’re not forgetting anything important. Key steps include filing payroll forms, sending 1099 forms to contract workers, assembling income and expense records, and storing and organizing files. While you’re checking things off your list, tax time is also a great time to do a quick insurance check for your business. Is your general liability insurance up for renewal? Do you have a copy of your ACORD certificate? Make sure all these things are set for the year ahead.
4. Know your write offs
There are numerous potential write-off options for small business owners, including:
a. home office deductions
b. startup costs
d. office supplies, furniture, and equipment
f. software and subscriptions
g. telephone charges (including cell phones, if you use yours for your business)
h. retirement contributions
i. travel, meals, entertainment and gifts
j. applicable insurance premiums
When in doubt, you can always check with the IRS and/or your tax consultant.