For many business owners, tax season is perceived as headache season but taxes don’t have to be a hassle. Strategies like keeping your records in order all year long, familiarizing yourself or your staff with the relevant deductions and regulations as well as understanding your tax return post-filing will prove valuable. Here are several tips to help you master taxes.
Keep it Together
About 60 percent of small business owners say they spend more than 40 hours a year dealing with federal taxes. Dial down the stress and save some time by staying organized year-round. You don’t only need well-kept numbers for tax prep purposes but business owners often need to provide financials when in the pursuit of investors or lenders. Why not glean twice the benefits simply by being systematic about what you spend? Sifting through receipts and files a day before deadline is no one’s daydream. Stay one step ahead by making the time to be organized. Put a system in place or bring someone on board who has the time and expertise to assist.
Don’t Miss a Minus
Make the time you invest into organizing your tax records worth it. Understand what qualifies your personal effects and spaces as write-offs and keep accurate track of their usage. Don’t overlook deductions like your car and your home office. Track mileage and parking charges you’ve incurred for business travel. Is your home the primary location where you conduct your business? Or is there a space in your home dedicated exclusively to your business operations? You can deduct the relevant expenses. New to the business ownership bracket? Claim start-up business expenses like computers, furniture and inventory. Courting new clients? You can write-off 50% of business entertainment expenses like business lunches. Stick with the trend of being organized and record who attends and the nature of those outings. You won’t regret having records to back-up the deductions you’ve claimed when it means avoiding an audit or at least being prepared, in case the IRS randomly selects your return.
Make it your Business to Know, or Go Pro
According to the National Small Business Association, nearly 60 percent of business owners say administrative burdens were the biggest problems posed by federal taxes. Tax code is complicated -- especially with new regulations in place such as healthcare law and the permanent tax break via an extension to Section 179, which addresses deducting depreciable assets (equipment) up to $500,000 based on an organization’s gross revenue [Section 179 Infographic] -- perhaps so much so that code is a catalyst for many small business owners to hire a tax preparer come tax season. It’s crucial to check tax laws every year. If you have an in-house accountant or bookkeeper, confirm he/she has access to the most current information which is not only vital for tax filing in the present but for planning for your business’ future. Hiring a tax professional means added money and time spent for a typically already budget conscious small business but the NSBA’s report revealed that 85 percent of business owners surveyed relied on a professional to prepare their returns. With a looming hope for lower taxes on small businesses, make sure you take the time to research a trustworthy tax preparer before you pay someone to crunch the numbers for you. It’s important to avoid penalties and equally important that you’re getting all those deserved deductions.
According to the National Small Business Association, nearly 60 percent of business owners say administrative burdens were the biggest problems posed by federal taxes. Tax code is complicated -- especially with new regulations in place such as healthcare law and the permanent tax break via an extension to Section 179, which addresses deducting depreciable assets (equipment) up to $500,000 based on an organization’s gross revenue [Section 179 Infographic] -- perhaps so much so that code is a catalyst for many small business owners to hire a tax preparer come tax season. It’s crucial to check tax laws every year. If you have an in-house accountant or bookkeeper, confirm he/she has access to the most current information which is not only vital for tax filing in the present but for planning for your business’ future. Hiring a tax professional means added money and time spent for a typically already budget conscious small business but the NSBA’s report revealed that 85 percent of business owners surveyed relied on a professional to prepare their returns. With a looming hope for lower taxes on small businesses, make sure you take the time to research a trustworthy tax preparer before you pay someone to crunch the numbers for you. It’s important to avoid penalties and equally important that you’re getting all those deserved deductions.
Roll Call
It’s essential to accurately classify your employees. Full-time employees and freelancers (independent contractors) are two very different animals when it comes to tax filing and reporting income. Remote worker bees and telecommuters continue to make more appearances in workplace dynamics -- and on payrolls -- and in many cases are a necessary element for small business success. Be careful, don’t get fined because your employees’ roles with the business are not accurately defined. Intuit offers a worker “wizard” to help you classify team members as an independent contractor or employee.
Review to Avoid a Repeat
It takes time but it’s a simple practice to put into place. Reviewing your business’ return with an accountant will provide guidance for future endeavors. Understanding the return and what it means for your business will unveil areas needing improvement and how you can avoid tax mishaps or set yourself up for similar success moving forward.
Other Helpful Resources
BBB offers a directory of qualified tax preparers and accountants, important IRS resources and tips on how to avoid tax scams for the 2016 tax season. For more information you can trust, visit us at bbb.org/boston, like us on Facebook, or follow us on Twitter and LinkedIn.
Written by Stephanie Benz, Senior Social Media Associate for Better Business Bureau Serving E. Massachusetts, ME, RI & VT. Meet Steph.
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