As a small business owner, you’ve got a lot on your mind. You’ve got to keep track of expenses, cash flow, marketing strategies, and customer service - and, of course, the almighty bottom line. With all that on your plate, the one thing you don’t want falling off the radar is tax preparation. The clock is ticking down to April 15, so if you want to minimize Uncle Sam’s impact on your business operations, consider the following five tips.
1. Choose Your Filing Method
The IRS website offers a variety of electronic filing options for your small business return. Major tax prep software products, like those offered by H&R Block and TurboTax, have excellent options, as well.
If you prefer more traditional methods, you can always file manually. Many small business owners can simply attach the Schedule C to their personal returns, or use Form 1120 if their businesses are corporations. For help finding the right forms for your small business, search “choose your business structure” at the Small Business Administration website.
2. Research Potential Deductions
Fortunately, business owners are allowed to deduct a range of expenses, including qualifying meals and entertainment, certain travel costs, and a portion of startup expenses – as well as virtually anything else required to run your operation. Check the IRS website or ask your CPA for information on specific deductions.
If you take the home office deduction, you must use your space regularly and exclusively for business. Check out IRS Publication 587 for more information. This year, an easier method of determining the home office deduction is available – simply deduct $5 per square foot of your home office space (capped at 300 square feet). You might actually be able to get a larger deduction by computing it manually, though.
3. File for an Extension if Necessary
Just like you can file for a personal tax return extension, many businesses are eligible for one, as well. Generally it involves completing Form 7004, and requires you to send in a payment, estimating what you owe. Failing to do so can incur interest and penalty charges. If your business is classified as a corporation and your tax year ended on December 31, the deadline for an extension has already passed – but keep it on your radar for next year.
4. Consult a Professional
The right professional can save you major headaches if you’re flummoxed by your tax situation or are new to filing a business return. Search the AICPA website for finance professionals well-versed in small business taxes or reach out to your colleagues for recommendations. You already know that saving money is a key tenet to small business success, but knowing when and where to invest it is essential, as well.
5. Get Organized for Next Year
If you spent a lot of time tracking down documents in preparation for this year’s return, set yourself up with a basic filing system and store your receipts and statements as they come in throughout 2014. When next tax season rolls around you can be one step ahead and complete your return quickly and painlessly.
When in the process of actually completing your return, don’t waste your time trying to figure out how much you can save by taking a deduction you’re not entitled to, or by not reporting all business income. It’s simply not worth it. Be on the up and up with every aspect of your return and you can get it completed in a shorter period of time – and sleep better at night, too.
What tax tips do you have for small business owners?