It's tax-time already? Funny thing about the government: It expects you to pay up annually (quarterly for some taxes), year after year after year. So while your 2012 books may be closed, there’s still plenty left to do to satisfy Uncle Sam.
We’ve collected a range of small business resources designed to make tackling the tax chore easier for this filing season. And since this is guaranteed to come around again next year, we asked industry experts to offer their advice on how to make next time less, well, taxing.
Oh, and one first tip on us: The filing deadline for "S" and "C" Corporations is March 15, so if you haven’t already, file Form 7004 for a six-month extension.
Small Business Tax Resources
The government doesn’t make many things easy, but when it comes to taking your money it can be most accommodating. Thus, it’s no accident that one of the best tax resources is the gaping maw itself: the IRS. The surprisingly inviting home page offers quick links to sections on credits and deductions, topics of interest and much more.
Figure 1: The IRS website is one of the best small business tax resources going.
Small business owners will want to jump directly to the Small Business and Self-Employed Tax Center area of the site. This portal serves taxpayers who file Form 1040, Schedules C, E, F or Form 2106, as well as small businesses with assets of less than $10 million. Here you’ll find links to the forms and publications such businesses need, a video portal with webinars and audio presentations tailored to small business owners, a section on employment taxes and an A-to-Z index for jumping directly to a specific topic.
You’ll also want to check out the range of online tools and educational products offered, including a handy Tax Calendar desktop tool that alerts you as various deadlines approach.
Tax Time? Think Intuit
Thanks to its TurboTax line of products, Intuit has become inexorably linked with tax time. The company offers a range of tax calculators, tips and guides on its site, including a section devoted to small business taxes. It’s an excellent place to brush up on what you know -- and to learn what you don’t (like, what is IRS Form 720 and can you deduct your cell phone bill as a business expense).
The site also offers instructional videos on topics such as payroll taxes, when to issue a 1099-MISC tax form to a vendor, and IRS rules for reasonable business expenses (based on the presumption that the IRS is reasonable, but we digress). Also check out the summary of business tax law changes for 2010 through 2017, which offers a snapshot of major changes coming down the pike.
If you would rather skip the free do-it-yourself advice and jump right to paying a CPA to do your business taxes for you, check out Intuit’s TurboTax CPA Select service. This online service matches small business owners with CPAs ready, willing, and able to tackle the tax-filing burden.
You can see their credentials and read user reviews to select the CPU you’re most comfortable with. And don’t worry about bundling up your paper receipts and documents and shipping them off; you can share them with your chosen accountant by uploading them, faxing them or even snapping a picture of them with your smartphone camera.
Interact with the CPA on the phone or via email and, when all is said and done, the tax pro will e-file your taxes. Intuit guarantees your satisfaction, and claims that the fee (starting at $349.95 for typical small business filing) will be lower than the national average charged by independent CPAs for the same service.
Small Business Taxes & Management
Also on the resource front, the Small Business Taxes & Management site is a clearinghouse for all things tax related. Updated every business day, the site offers daily news and tips and a range of special reports.
We especially like the S Corporation tax prep checklist for 2012, a (very) exhaustive list of items -- most of which also apply to LLCs and in some cases sole proprietorships -- that might apply to your tax situation and you should have at the ready when preparing your taxes or working with your accountant. Also handy: the Federal and State tax calendars, which show important due dates.
Small Business Tax Tips for 2013 and Beyond
The numbers for tax year 2012 may be fully baked, but there’s plenty of time to work 2013’s number to your advantage. A group of tax and finance experts offer up a baker's dozen worth of tax tips and tricks to lighten the load in years to come.
The good folks at SurePayroll, an online service that helps small business owners handle a wide range of payroll chores, offer up several tips for entrepreneurs to keep in mind.
1. For starters, keep close track of all business expenses as the year unfolds and enter them into your accounting system in a timely fashion. Going through a stack of receipts -- or worse, trying to recreate what you spent on what -- come tax time is a sure way to miss money-saving deductions.
2. Also, as you work with vendors or outside contractors, anticipate the ones you will pay more than $600 over the course of the year so you can issue 1099-Misc forms at the end of the year. Oh, and be sure to have complete, correct names and Social Security numbers for those vendors and for your employees’ W-2 forms. On W-2s, the IRS may impose a penalty for each form without this information.
3. Finally, verify the proper withholding for taxable fringe benefits. A small business owner can consider offering employees fringe benefits such as health, vision and child-care assistance instead of standard raises to reduce tax burdens.
Consult IRS Publication 15 to find out what pre-tax fringe benefits are available and consider applying any or all of them to your company. Check out SurePayroll’s Small Business Resources site for free business calculators, guides to payroll and employment laws by state, and a payroll glossary.
More small business tax advice comes from Outright, an online small business bookkeeping service.
4. The company’s experts urge small business owners to check the accuracy of all forms you receive. Since the IRS receives the same forms, changing the numbers on your return is a red flag.
For example, online sellers receive a 1099-K form with their revenues from specific payment processors—and the IRS uses this form when it decides whom to audit. However, the form does not differentiate between business and non-businesses transactions, so if a seller uploaded money into his own PayPal account, it would show up in the 1099-K as if it were revenue from a customer.
5. When faced with a choice of deducting either your actual auto expenses (backed up by receipts of course, which we all diligently track) or the mileage deduction for business-related driving, take a mileage deduction. At 55.5 cents a mile for 2012 (and a penny more in 2013), the mileage deduction is a better deal. Conveniently, mobile apps such as Outright make it easy to log your mileage as you go.
6. Also, if you have unsold or unused inventory, instead of spending money on storing it, donate it and get the tax deductions. (Just keep in mind that goods donations greater than $500 have more rigorous reporting rules.)
7. Do you like your kids and spouse? If so, you can hire them and save on next year’s taxes. For instance, if you pay a minor child up to approximately $6,000 from your business profits for helping you with tasks (no, mowing the lawn doesn’t count -- unless you have a landscaping business), that amount is not taxed the same as your ordinary income. Also, if you hire your spouse, then as his or her employer you can pay for the healthcare of their family -- i.e. yours -- and those payments are also tax deductible.
The CPAs at Xero, an online accounting platform that also enables online collaboration between accounting professionals and their clients, also offer salient advice.
8. Jody Padar, CEO and principal of the Chicago-area New Vision CPA Group and a partner with Xero, advises her clients to take advantage of today’s mobile cloud-storage technologies to keep track of your expenses. Many online accounting solutions (Xero included) feature mobile receipt upload: Take a picture of the paper with the camera on your iOS or Android device, and you can bid adieu to the crumpled receipt.
9. Padar also notes that Section 179 of Small Business Expensing allows SMBs to deduct the full purchase price of qualifying equipment and/or software up to $500,000.
This is a 2013 tax extension carried over from 2012, but it was on the chopping block and there’s no guarantee it will survive into 2014. Translation: make those needed upgrades that qualify this year.
Greg Jones, CEO of BookKeeping Express, the first U.S. franchise focused solely on bookkeeping services, also offered some tips on how to save small business owners money, time and pain at future tax time.
10. In addition to maintaining a complete and accurate set of books as well as adequate documentation to back up claimed expenses, Jones urges clients to keep business and personal expenses separate. That means maintaining separate a checking account and credit card account for your business.
11. He also pointed out that new businesses have special advantages, most notably that the costs of launching a business are considered capital expenses, and you can deduct up to $5,000 your first year in business.
12. There’s also business-related education: You can deduct educational expenses that maintain or improve skills required in your present employment, including seminars, classes, and convention fees (and it’s a bonus if said convention takes place in a warm, sunny locale).
13. Finally, Jones points to the hidden gems in the provisions of the Small Business Jobs Act Tax, signed into law in 2010. The law has nearly 20 initiatives aimed at decreasing the tax burden and providing savings for small businesses.
Jamie Bsales is an award-winning technology writer and editor with more than 20 years of experience covering the latest hardware, software and Internet products and services.
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