Miss me yet? No, I’m “not dead yet” (for you Monty Python fans). Nor have I fled to Hong Kong (a la Edward Snowden). And no, contrary to rumors, I am not working on a Middle Eastern documentary with Jon Stewart. Ahem. My MIA status was simply due to too much work. Good problem to have, right?
Regular posting will resume next week. In the meantime, since it is, once again, tax time for quarterly filers, I thought this guest post on tax issues particularly appropriate. Even if you don’t file quarterlies, pay attention now to save heart ache at the end of the year!
Looking for a few small-business tax tips? Consider this shortlist to help streamline your process:
1. Proper record-keeping: Year-round record keeping ensures that come tax time, your paperwork will be in order. Make sure that you save all documents relating to deductions in case your business is audited. Because tax credits and deductions change from year-to-year, keeping excellent records allows you to adapt while being able to reference previous years simply by checking your filing.
2. Keep two Acts in mind: Both the Small Business Jobs Act and the Patient Protection and Affordable Care Act (aka “Obamacare”) help you manage your tax burden. The first has over 17 tax provisions that decrease taxes for small businesses, all of which can win your business great savings. The Affordable Care Act allows small businesses to cover 35 percent of the health care premiums that they pay to provide health insurance to employees. In 2014, the amount will increase to 50 percent.
3. Avoid an audit: Audit traps are indicators to the IRS that they need to investigate your business dealings further. Avoid this scenario by keeping the following details straight:
Home Office Deduction rules: Know what qualifies a home office and make sure yours abides by the IRS definition before claiming one. Not all home-based businesses qualify for this deduction.
Properly classify your employees: Independent contractors and employees are not one and the same from an IRS perspective and should not be treated as such. Non-compliance with proper classification is a red flag to the IRS that your business may be attempting to avoid payroll taxes and can result in back taxes and penalties.
Miscellaneous deductions: Be cautious with your deductions, as a large amount of itemized deductions can raise suspicion. Be sure that you have all of your paperwork to support any deductions and claim them in a clear and specific manner.
Business and personal expenses do not mix: While Turbotax encourages freelancers to combine business with pleasure and write off the expenses, the IRS does not welcome this blended method and will scrutinize individuals who combine their business and personal expenses too often. Maintain separate bank accounts for your personal life and business and maintain meticulous records to ensure that your actions do not require further attention.
Whether you have an accountant or do your business taxes yourself, knowing the proper way to file is an excellent policy for a small and growing business. By maintaining clean records and staying aware of IRS policies, you can make the most of business deductions and enjoy a penalty-free tax season.
Chelsea Terris provides online content for Meticulous Plumbing, a family owned company located in Portland, OR. Chelsea is passionate about helping small businesses thrive.
Thanks Chelsea for the tax tips!