by Rohan Mathew, co-founder and executive director of The Intersect Fund
We are just days away from the tax deadline and for small business owners, it’s not just a matter of filing properly, they are also working to make sure they are working all of the tax codes to their advantages. However, there are some simple and timely tips that can help out any small business owner in this tax-time crunch!
Many small business owners should look for assistance and tips to help them save money and time this time of year. Here are eight simple and effective tips that small business owners should consider just in time for tax day.
1. Understand your deductions.
Know what is available to you and how you can prove them. Record keeping is key. Some common deductions for business owners include travel, meals, home office, entertainment and health insurance. Make sure you keep original receipts, you will need to have them if there is any questions later.
2. Work with a tax professional.
There is absolutely nothing wrong with online tax preparation software, but with tax code changing and the complexity of it, a professional review for business tax fillings before submission is likely the best course of action. Small businesses often miss available deductions or sometimes small business owners write-off expenses that they are not allowed to.
3. If you feel you must prepare your taxes yourself, use a computer program to cut down on time and mistakes.
Software programs like QuickBooks or online Web sites like Turbo Tax will help you calculate your income, expenses and credits, and will keep your information on file for future reference.
4. Make sure your records are in order.
Organization is the key to success. We are already closing in on the last minute, but you don’t want to wait until the last hour to find out that important paperwork you need is missing. Make sure all your documents are together, organize into categories, and if anything is missing, make sure you get it or find it before you start putting taxes together.
5. Make sure to avoid Audit red flags.
The IRS is always on the looks out for red flags for small businesses that alert the government to unacceptable deductions. One big no-no is claiming large deductions that exceed your income for the year. One area that is especially tricky for a number of small business owners it home office deductions because the criteria is limited and some items in the home office might simply not qualify. Did you know that the IRS compares your deducted expenses to averages for your industry? You can see how your sales and expenses compare here: (http://outright.com/widgets/schedule-c/iframe.html). If you are unsure of what does and doesn’t qualify, ask a professional.
6. Take advantage of liberal deductions for equipment purchases made in 2012.
Under the fiscal cliff deal, small business owners can generally deduct 100% of purchased new equipment up to $500,000 in the first year using Section 179 and bonus depreciation, rather than spreading out the deduction over several years. This is in effect for 2012 and 2013.
7. Double check your work before sending it in.
Always double check everything before e-filing or mailing your returns in. Make sure you have entered in all the correct tax amount from tax tables, your social security and all dependents social security numbers are properly listed, names and birthdates are all correct, filing status is all listed properly and more. Just double and triple check your work. Anything you can do now to avoid having to fix mistakes later will only help you in the long run.
8. Don’t be afraid to request an extension.
Time can get the better of all of us and if you think you won’t make the tax deadline, you can request an extension for your business. Simply fill out the proper forms and turn them in on time. However, please remember that filing an extension will only give you extra time to file your return, not to pay any taxes you owe!
Rohan Mathew is the co-founder and executive director of The Intersect Fund.