We’re officially in the middle of tax season, and small business owners have both personal and business taxes to take care of. Successful small business owners know the importance of tackling tax issues as soon as they present themselves, but hectic schedules and an ever-growing list of responsibilities can make this a difficult task.
As we draw closer to the April tax filing deadline, it’s important to determine exactly what your organization owes to Uncle Sam and to figure out which deductions you can take advantage of this filing season. Don’t let taxes destroy all your successes; keep the following tips in mind and come out of tax season in a better financial position than ever.
Always File Your Taxes on Time
Whether you can pay your tax debt in full or not, it’s important that you file your return. Most businesses opt for an accountant to ensure everything goes properly. However, there are some savvy business owners who are more than capable filing taxes with basic tax preparation software. The failure to file penalty is much stiffer than the failure to pay penalty.
If you do miss the tax deadline for filing, it’s a good idea to look into failure to file penalty abatement, as the costs of this penalty can quickly add up and may be enough to topple your company’s profitability—and future.
Consider All Available Small Business Tax Deductions — and Make Sure Your Business Qualifies
- Travel Costs: If you’re required to travel to keep your small business afloat, there are numerous expenses you’re allowed to deduct on your taxes. From airfare to hotel stays, gas for your car to automobile rentals, laundry to food, there are plenty of deductions to capture. Just remember that costs for any family member traveling with you can’t be considered deductible expenses.
- Home Office Expenses: Many small business owners are hesitant to claim “home office” deductions, in the fear that it will bring the fury of an audit down on their business. This fear is unlikely to come to fruition and could see you leaving perfectly good money behind. If you can claim a legitimate tax credit, you should do so—fear of an audit shouldn’t keep your business from claiming what it’s owed from the government. Just ensure your records are well-organized and have documentation that proves your home office is used for small business purposes only.
- Contracted Labor: If you use independent contractors to handle labor needs, their contract labor may be deductible. Ensure you’ve distributed Form 1099-MISC to any hired contractor who received $600 or more from you in 2017.
Deduct All of Your Business’s Appreciable Stock Contributions
If your small business made any charity contributions in the last year, you likely already plan to deduct the amount donated. In the future, be sure to donate appreciable stock contributions instead. That means your small business is eligible to deduct the current worth of stock at the time of contributing—not what you purchased the stock for originally. Let’s take a look at this tip in action.
Say your business bought stocks at $25 apiece 5 years ago. You’ve decided to donate those stocks this year, and in that 5 year span, they’ve accrued a worth of $100 apiece. You are then able to deduct $100 each when tax time comes around.
Review Your Bookkeeping and Accounting Team
Figuring out the complexities of taxes for small businesses can be daunting, and if you don’t already have an accountant or bookkeeper on your team, it’s time to start looking. A trustworthy accountant or bookkeeper (or a team of the both!) is crucial; these tax professionals can ensure your business is filing correctly and taking advantage of all tax deductions possible.
If you do already employ an accountant or bookkeeper, check in on their processes and be sure they’re making the right moves for your business’s sake.
Become an S Corporation
If your small business isn’t already incorporated, you might consider converting your company to a Subchapter S Corporation. This can provide a myriad of benefits, including reduced liability, more control over the types of taxes you pay, greater credibility as a business, and further separation between your personal funds and assets, and those of your business.
This tax season doesn’t have to mean disaster for your business. Use these tips to make it through this year’s filing process unscathed.