Tax tips fall into two basic categories: The longer list of things you can do during the tax year to reduce your liability and a shorter list of things you need to do after the year is over but before you file.
Our subject here is that second list. Let’s get going.
1. 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 you calculate it properly.
2. 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 a 401(K) and defined-benefit plans. You can contribute to standard IRAs up until the April 15 filing deadline. The contribution for some other plans can be pushed until Oct. 15, 2014 if you file for an extension. Seek specific advice from your tax professional.
3. Get your itemized deductions organized. Pull everything together for yourself or for your tax preparer well ahead of time. When everyone is under the gun toward the end of filing season, it’s far easier to overlook items. During crunch time it’s also easier for your tax preparer to forget to ask you about something.
4. 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 brooding waters of the income tax ocean, including videos, audios and webinars.
5. 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 15 filing deadline. Failing to do this results in a penalty plus interest.
6. Don’t raise any audit red flags. 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. Talk to your accountant and ask about audit red flags specific to your industry. Some of these items need to be properly handled throughout the year.
By the time we file our 2013 taxes, we’re well into the 2014 tax year. You have probably been following the twists and turns of the implementation of the Affordable Care Act. Be sure you know where you stand. There are costs as well as credits. Get solid professional advice.
