While I actually enjoy tax season, I know the majority of people do not view it as a joyous time. Most people end up scrambling to complete their taxes, expecting to receive a hefty tax return. Okay, so tax season may not be the most exciting time of the year, but we should still get the ball rolling and begin preparing our taxes. However your business is structured, there are several steps you can take to get your small business taxes in order. Maximize your deductions and breeze through this tax season by following these five small business tax preparations tips. Prepare for an Audit
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Whether you hire a professional to do your taxes this year or purchased small business software and do your taxes yourself, there is always a chance your business will be audited. From personal experience, I can tell you the anticipation of an audit can take its toll on you, both mentally and physically. The IRS will generally perform an audit on a company if its tax returns don’t add up or if you included information in the wrong field, even if there isn’t a true issue with your filing. One negative about the audit process is the IRS can look at your tax returns up to six years in the past. I recommend you keep your tax records (electronic and hard copies) for the past five years at your disposal in the event your company is audited for whatever reason. There’s no need to scramble if you are audited. With just a little bit of preparation and planning, you can cover tackle any audit head on. Review your Books & Organize your Records
Whether you’re running an expanding small business or you’re an independent contractor picking up work, set some time aside as the tax filing deadline approaches to examine your books. To ensure you file your taxes accurately, you’ll need to take the time to make sure all of your entries are accurate. Your records and other documentation should support the numbers you provide for your tax return. All of your business records should be organized before tax season, but if they aren’t, you must begin gathering all of your invoices, receipts, pay stubs, and previous returns.
Know your Obligations
If you hired independent contractors last year, or hired in-office employees for the first time, it is pertinent that you familiarize yourself with all of the tax reporting obligations and deadlines you must adhere to. As an employer, you must provide all of your employees with their W-2s by the end of January. You must also file your employees’ W-2s with the Social Security Administration, proving all wages paid and taxes withheld for your employees. This will accompany your W-3 to be submitted by the end of February, which states your companies total wages paid out.
If you hired independent contractors in the past year, or any other business that is under your company, you need to provide them with W-9 forms, but only if you paid them at least $600 throughout 2012. The deadline to provide any independent contractors with their 1099-MISC forms in order to report payments made to those contractors is the end of January. Throughout the year you should maintain all of these, along with contractors’ business licenses and insurance certification throughout the year, to make this as easy a task as possible.
Defer Earned Income
You may be able to reduce your overall taxable income for the 2012 tax year if you have the ability to defer payments you receive for services rendered. This will allow you to defer your tax owed on this income until April 2014. If you have a LLC, S-Corporation, or are in a legal partnership, deferring your income can help you if you don’t foresee any significant changes to your tax rates in the new year. However, if you think your tax rates may change for 2014, collect payments as soon as possible and include them in this year’s tax filing.
Brush up on your Deductions
It’s likely you used the last month or two of 2012 to increase your expenses so you could maximize your business’ tax deductions. Whether you stockpiled office supplies, paid your office’s utility bills in advance, or made some charitable contributions, your expenses affect how much you can deduct in your tax filing. You should research the deductions you usually claim as well, as many of them have changed. One example is the start-up deduction, which has been reduced to $5,000 after previously being a $10,000 deduction. Numerous changes have been made to business tax laws. Spend some time prior to filing your taxes this tax season to properly inform yourself of all of the deductions you can claim.
If you do as much research as you can before filing your taxes, it will help you determine if you have any deductions you qualify for, if there are any extra forms you may need, or if you should seek professional tax help. Choosing to tackle your small business taxes before it becomes crunch time will allow you to become organized and submit your filing well before the tax season ends.
Lance Trebesch is the CEO of TicketPrinting.com & Ticket River, which offers a variety of event products and ticketing services. After nineteen years of Silicon Valley experience, Lance found the key to happiness is helping customers worldwide beautify and monetize their events with brilliant print products and event services. Listening to his customers and learning about how they plan their events - ranging from concerts to fundraisers - has helped him gain insight and expertise on how to host a successful event that he is always eager to share.