8 tax-time tips for the small-business owner
Need additional help? Visit www.IRS.gov or www.SBA.gov for additional tax tips for business owners.
With April just around the corner, that dreaded tax deadline isn't far behind.
And that means many businesses digging through files, filling out forms and meeting with tax preparers to stay ahead of the curve.
The process might be stressful at times but, if you're prepared, it's possible to keep tax-time headaches to a minimum.
Here are a few helpful hints for small-business owners.
Keep thorough records.
From purchase receipts to previous years' taxes, to employee information and more, it pays to have that necessary information on hand if questions arise during tax season. Keep those records up-to-date throughout the year so you don't miss anything.
Have a general idea of your financial standings.
Do you know what your expected annual expenses will be, or whether you think you'll owe much in taxes? If not, you should. Having a basic idea of your financial situation helps you plan ahead in the long run, budget your money and more.
Know whether the people working for you are employees or independent contractors.
If you have the right to control and direct what people do and how they do it, those workers are probably employees. If you merely control the result of the work done and not how it's accomplished, however, they're probably independent contractors. An incorrect classification can mean additional taxes and penalties for you, and both higher taxes and loss of benefits for the workers.
Factor in business expenses.
Small-business owners can deduct the costs related to running their businesses. In order to be deductible, those expenses must be ordinary - meaning they are common and accepted in the line of work - and necessary - meaning they are helpful and appropriate for the work. Business expenses don't necessarily have to be indispensable.
Keep an eye on 1099 forms.
A new question appears on tax forms this year, asking whether employers paid any workers throughout the year that should have received 1099 forms, and whether those forms went out. While it's not a new requirement - it applies to farms, rental schedules and virtually any business - the question hasn't appeared in the past.
Consider hiring out your company's payroll services.
Payroll issues, such as not properly paying taxes and the like, cause headaches for many small businesses. Handing such services off to a third party can be worth its weight in gold.
Remember extra work means even those with other full-time jobs can be considered self-employed.
Self-employment can include part-time work done at home or in addition to your regular work. Those who are self-employed must typically pay self-employment taxes, similar to the Social Security and Medicare taxes withheld in your other work.
Ask for help if necessary.
Information is available online and over the phone from both the Internal Revenue Service and the Small Business Administration. If someone prepares your taxes for you, they can also offer insight into the situation. Small businesses' tax preparers should be available to answer questions year-round, not just January through April.
Sources: Cathy Marek, CPA with Alexander & Marek CPAs, Lynn Miori, CPA and CFP with Keller & Associates and Internal Revenue Service website