We have compiled 6 things for small business owners to consider in preparation for the April 15 deadline.
Keep Good Records and Understand Available Deductions – Proper record-keeping year-round is the first step to ensure taxes are filed accurately. Save essential paperwork that could be needed to back-up deduction claims, should there be an audit. Keep in mind that tax credits and deductions change each year.
Utilize the Small Business Jobs Act Tax Provisions – The Small Business Jobs Act of 2010, has over 17 tax provisions to decrease tax burdens for small businesses.
Avoid common audit traps – It is very important to be aware of potential red flags, which could include:
- Home office deduction – This deduction is very specific and not all home-based businesses qualify. Know how to determine if you are eligible to claim this deduction and what specific expenses may be deducted.
- Large sum miscellaneous deductions – If you claim a large amount of itemized deductions or miscellaneous expenses, relative to your income, the IRS could get suspicious. Be specific and label every deduction.
- Keep business and personal expenses separate – The IRS scrutinizes personal expenses that may have been claimed as a business expense. Be diligent about keeping good records.
Utilize the depreciation deduction – Section 179 of the U.S. tax code allows businesses to write off newly purchased property or equipment all at once, as opposed to deducting the annual depreciation amount. Just about anything new or used that is tangible is eligible.
Know the difference between an independent contractor and employee – Businesses are required to pay state and federal payroll taxes for each employee, including 50% of their staff member’s Social Security and Medicare payments but not for independent contractors. There are some clear distinctions between the two so be careful not to classify someone in an employee role as a contractor.
Consider filing an extension – If you don’t think you will be ready by the 15th, there is the option of deferring your tax filing for six months by completing IRS Form 4868 by the filing deadline. There are no special conditions to qualify for an extension; however, you are required to pay your estimated taxes by April 15th.
With all things taxes, there are many conditions that must be met and utilizing an accountant that is familiar with your businesses needs is always the safest way to go.
These tips are not indented as tax advice and were compiled from SBA.gov and the Huffington Post.Back to blog