8 Useful Tips to Deal and Handle Your Business when Tax is Near
You can never escape tax time, all types of business, even if you have just started with your business or you have been in the industry for a while, tax will always be your responsibility to do. In order to avoid hassle and stress, mentioned below are tips that can help you organize and everything ready.
1st Step: Keep in mind your tax dues
You know how time speeds up, and in a blink of an eye its already your deadline. Missed deadlines leads you to expensive penalties you need to pay.
But before the date of your deadline which is April 17, 2017 there are still additional documents to the IRS that you also need to submit.
Mentioned below are the important dates you need to remember:
Submit W2 Postmarked and Forms 1099 before February 2
You already have provided your W2 and 1099 if already paid your employee or independent contractor with more than$600 in 2016. It should be paid on or before February 1 to be sure.
Submit Partnership Returns Due before March 16
If you submit earlier than march 15 you will have a chance to receive a Schedule K-1’S before the personal tax return due.
Submit Corporate Tax Return Due before April 17
You should file your corporate tax return which is forms 1120 and 1120S before March 15 or you can apply a tax extension to have it settled.
April 17: Individual Returns Due
You should file an individual or sole proprietor tax return which is form 1040 before April 17 or you can apply a tax extension to it settled.
2nd Step: Organize your Receipts
If you think you’re not good at keeping all those papers, you should try storing all your receipts online, it can save up a lot of your time.
If you want to pursue in organizing your receipts paperless, use the tools mentioned:
Have it Free with Evernote
It is a free app on where you can upload photos of your receipts, business cards or any important documents from your device. You can also scan your receipts with ScanSnap an upload it in Evernote.
For only 100% a month Use ShoeBoxed
Shoeboxed will enter all your data’s just by sending all your receipts through email in what they call Magic Envelopes to get through with ShoeBoxed.
5 per month for each user with Expensify
Expensify can automatically import any transaction made by bank cards while you can manually add with transactions through cash. You can also easily take a picture of your receipts and those receipts are automatically that matches your correct expense with the use of SmartScan.
3rd Step: Make sure your Bookkeeping is recent or up to date
It is very important to have your books up to date or is the recent one if you are about to file your taxes. If you keep it up to date you are safe in case of audit, you can also monitor correctly the income and expenses coming into your account.
It’s up to you if y our want to have a professional bookkeeper to do the job for you or use and online accounting software. You can look both of the options online. This is important to assure you don’t run the chance of having false claim to the IRS which could be scary.
You should weigh things on whether you have enough time and is comfortable in managing your own books, or are you financially capable of hiring a bookkeeper, it is always up to you.
4th Step: Make Sure to Submit your 1099s
You already have sent a Form 1099 if you already paid your contractor more than $600 during the tax year. You should make sure you submit it on February 1 and submit a copy to the IRS on March 31,2017 to have everything settled.
5th Step: You should have the idea of Sales Tax Requirements
You may want to consult and ask help for an accountant with your sales tax since it is a little bit more complicated and harder.
These state tax requirements are ordered by a legal concept called Nexus. It obliges your business to have a connection to a state in order to gather sales tax within that state.
It is a majority that most businesses are only available in the state they are in, but it is possible to have your nexus into other states.
Nexus can develop with these given examples:
- The office
- The Employees
- A warehouse
- Hosting a pop-up shop or selling at a craft fair
- Your Storing inventory
It is legally approved and required to gather sales tac with the location your business has developed nexus. Be sure to consult with a tax professional to assure that you’re sufficiently meeting states sales tax requirements to ensure you are not violating tax laws.
6th step: Contemplate about Filing for a Tax Extension
When you say tax extension it doesn’t mean that you’re exempted in paying taxes of your deadline. It just gives you more time to prepare and file for your tax return.
It is easy to file for a tax extension; you just have to fill out the form that correlate with your business type and estimate the amount of taxes you owe for the whole year. After filling out the form, submit it along with the payment for your taxes owed to the IRS through mail or electronically on or before April 15 and March 16 for corporations.
Your extension is automatic once you file before the deadline. You will only be contacted by the IRS if your application is invalid. You should make sure to pay for your taxes even if you filed for an extension to avoid penalties and interest.
You should use the form that corresponds with your business type if you file for a tax extension:
March 15, 2017-Partnership
For you to be able to qualify for an automatic 7-month extension, you should use Form 7004.
April 17, 2017-Corporations
For you to be able to qualify for an automatic 6-month extension, you should use Form 7004.
April 17, 2017-Sole Proprietorship
For you to be able to qualify for an automatic 6-month extension, you should use Form 4868.
7th Step: Look into Tax Deductions
To all online sellers, deductions are usually available or present.
You can have all your expenses deducted with the Form 1040 on schedule C, or else noted. You should also seek for advice with your accountant if you’re having a new business so that your expenses won’t be at the start-up costs.
A Home Office Deduction
To qualify for the home office deduction, you need to meet three requirements: exclusivity, regularity, and precedence.
You need to acquire three essentials in order to qualify
- The Exclusivity: Your working area is intended and only business use.
- The Regularity: You should regularly use home office, be consistent.
- The Precedence: You should spend most of your time and do your important activities and business in your home office.
There are two methods you can use in order to compute your home office deduction, first is the simplified method second is the regular method. Using the simplified method, you can take a standardized deduction of $5 per square foot of your home that is used for your business, you can have it up to 300 square feet. While the regular method is required to compute the actual percentage of your home that is used for business by dividing the area that is used for your business by the total area of your home, which has a slight difference with the other method.
You will need to fill up the Form 8829 if you wish to choose the regular method in calculating your deduction.
An Education Deduction
You can have a deduction once you take up workshops or classes that helps your business grow and can help your expertise improve.
Your Phone and Internet Costs Deduction
You can be able to deduct utility cost to a plan with a phone that is used only for your business. But if you are using a phone that is both for your business and personal use you only have a certain percentage depending on the percentage of how much you use your phone for business, that can be deducted to the total cost of its phone bill.
You should have an itemized phone to have valid proof of how much percentage you really are using your phone. If you ae using 60% of the phone for your business and only 40% for your personal use, then you have 60% of deduction. You can also deduct services used such as Google Voice or Skype as your office expenses.
If you are a work from home, then you can deduct your internet bill as a utility cost. You just have to compute the exact percentage you’re using your internet for your business use.
A Web Hosting and Online Store Themes Deduction
You can have the cost of your domain registration and web hosting deducted under other expenses. Even your online store templates or custom HitMe themes you purchased intended for your business is also deductible under a software or marketing expense.
The Contractor Work Deduction
When you hire an independent contractor, you can have its cost under contract labour.
The Shipping Costs Deduction
All your shipping goods sent to your customers cost such as packaging and postage cost can be under the deduction of other expenses.
The Use of Vehicle Deduction
You need to have a proof and monitor for the mileage of your business trips, for it to be deducted as business use. The tool Shoeboxed has a mileage tracker on for you to use. You should keep a record of the number of miles driven through the whole year, which is your odometer reading on January 1 and then on December 31. You should also have a record or proof on the exact dates of those meetings, trips, etc.
For it to make it a less hassle for you, you can track business and personal mileage for a two-week period every quarter, you can apply every year end to have an exact measure of your business and personal use. If you now have the total mileage driven, you should divide the business miles with its total miles driven to have a measured business use percentage correctly.
Your Online Service Fees Deduction
All the apps you are using to run your business can be a deduction under business expenses. Examples for those online services are HitMe and Shoeboxed.
The Equipment Deduction
The cost of your computer, camera and phone that are used as your business equipment can be recovered either via depreciation or through a section 179 deduction. Most accountants’ advice is to have it deducted under standard business expense.
It is important to correctly deduct your equipment cost because your business can save up for the expenses and acquire financial benefits. That it is why it is important to have an accountant to help you with this, they can provide you great advices and decisions that could help your business grow.
There are appropriate methods to be used for each item, it is also very hard and complicated to set up a depreciation. That is why it is important to keep your records of your business equipment purchases safe and ready, to have a correct deduction. You should also ask your accountant how to deduct it with your tax return, which is easy if you just follow everything that is said above.
The Professional Services Deduction
You can have any legal and professional payment connected to your business deducted under professional services. Examples to this are the payments charged by bookkeepers and accountants.
8th Step: Choose the Best Accountant for your Business and ask the these
Choosing the best accountant for your business means they truly understand and is knowledgeable about your industry, the specific need of your business and of course the agreement of their payment on how much will they be paid, or is it per hour rate or per consultation.
Now that you have hired your best accountant, you should ask them with the questions mentioned below:
- Are there any tax credits available locally?
- Is there any available nexus in other stated for my business? Have I correctly dealt with sales tax?
- Can I gain any advantages and benefit if I change my business structure?
Think positive
You shouldn’t negatively view taxes in your business, it may be too much of a hassle filling out forms, keeping records etc. but it still is a part of the business industry. You just have to think positive, follow everything mentioned above, seek for a consultant stay organized and you will be able to have a stress and hassle fee tax season, you no longer dread for that day.
