April 15th is on its way. Is your company ready?
Rather than shuffling through piles of paperwork last minute, get a head start this year in case any unexpected issues spring up. Tax-prep season, though not most business owners’ favorite time of year, is a good time to get your records organized and find extra ways to shave your tax bill.
Here are five ways to make the most of it:
1. Get organized now.
In an ideal world, you’ve kept records neatly filed throughout 2014 so that, come tax time, you can easily pull them out of a folder. But most business owners—unless they hire a bookkeeper—aren’t so organized. January and early February are good months to pull together all the documents you’ll need to file your tax return, including business expense receipts, payroll records, financial statements, and quarterly estimated tax records. Incorporated businesses, which file a corporate tax return, will also want to keep a copy of their certificate of incorporation, as well as a list of directors and shareholders and their contact information.
Allan Madan, a certified public accountant, recommends that business owners carefully document all expenses they plan to claim deductions for, whether office supplies or business meals. “These documents should clearly show vendor name, date, and amount,” he writes on New York International. Those expense records should be kept for a minimum of six years, Madan says.
2. Deliver income statements to employees and contractors by Jan. 31.
Federal law requires employers to send out income statements to employees and independent contractors by January 31st. Employees, for example, must receive their W-2 and contractors who you paid at least $600 to must receive a 1099-MISC form.
3. Find a smart tax preparer with experience in your industry.
One of the best things you can do for yourself—and your business—is to make sure you’re working with a trustworthy accountant or tax preparer with experience preparing taxes for your type of business. This person should understand the financial dynamics of your industry, so they know all of the tax considerations and potential breaks you might qualify for.
A video by the Internal Revenue Service offers some questions that businesses should ask when choosing a tax preparer. These include:
- How much experience does the preparer have working with your type of business?
- What services are included in the preparer’s fee?
- If the IRS audits you, what is the preparer’s policy on assisting you?
4. Make sure you’re claiming all the deductions you qualify for.
A good tax preparer will help you find deductions your business is eligible for. But it can’t hurt to think about deduction opportunities yourself. Did you buy new equipment, software or real estate in the last year? Did you pay for insurance for your employees?
5. Take advantage of last-minute tax breaks.
You still may be able to get a few more tax breaks from Uncle Sam. Contributions for the previous tax year to several types of qualified retirement plans, including solo 401(k) plans and SEP-IRAs, can be made until your business’s tax-filing deadline. Both a SEP-IRA and a solo 401(k) allow business owners to contribute a maximum $52,000 for 2014, but both carry their own contribution rules. If you make tax-deferred contributions, these plans can offer a very nice tax deduction—allowing you to defer taxes until you tap the accounts in retirement.
Whatever you do, don’t rush to file your taxes—as mistakes can be costly and even lead to an audit. If you feel like you don’t have enough time to adequately prepare your taxes, the IRS allows you to file for an automatic six-month extension.