You know the old saying: Nothing is certain in life expect death and taxes. So it’s that time of year again to pay Uncle Sam, and while you can’t get out of it, you can minimize the amount of the check you have to write. Here are six tax tips you should start considering now:
- Take the home office deduction if you are eligible. I don’t think I’ve met the small business owner yet who doesn’t devote some square footage of the family abode to business. If that’s you and you haven’t been taking the deduction, it’s time to get on board. Just be sure you’re eligible and calculate it properly.
- Contribute to your retirement accounts. Small business owners have various retirement account options, including different versions of the Individual Retirement Account (IRA) as well as 401(k) and defined-benefit plans. (Remember, if you use a Rollover for Business Start-up arrangement to fund your business, a corporate 401(k) is built into the structure.) You can contribute to standard IRAs and 401(k)s up until the April 18 tax deadline. The contribution for some other plans can be pushed until Oct. 15 if you file for an extension. Seek specific advice from your tax professional or financial adviser.
- Get your itemized business deductions organized. Pull everything together for yourself or for your tax preparer well ahead of time. This includes receipts, official tax documents, bank statements, etc. When everyone is under the gun toward the end of filing season, it’s far too easy to overlook items. During crunch time, it’s also easier for your tax preparer to forget to ask you about something – like a deduction that could save you money.
- Check out the IRS Small Business Tax Center. You can get all the forms you need, as well as publications, from this web portal. There’s also a lot of information here to help you better navigate the rough waters of the income tax ocean, including videos, pamphlets and webinars.
- Do everything you can to pay on time. Even if you file Form 4868 for a six-month filing extension, you need to pay the amount you estimate you owe by the April 18 filing deadline. Failing to do this results in a penalty plus interest.
- Be diligent with details. Don’t misclassify employees as independent contractors. If you have some overly large deductions, make sure they are legitimate expenses and not items that should be depreciated. Be vigilant about keeping your personal and business expenses separate. Some of these items need to be properly handled throughout the year, and failure to do so could cost you in penalties – or worse, an audit.
My best advice is to work with a tax professional. Tax laws change regularly, and unless you are a professional, it’s nearly impossible to stay up-to-date. Focus on what you do best for your business and let the experts do the rest.