Finalize your reported income and deductions
Even if you’ve already done it twice, doing it a third, final time won’t kill you and it may save you some money or headache down the road. Remember that the IRS matches the income you report to the income they record, so if these two numbers are wildly different, it’s going to send up some major red flags for the IRS.
Also making sure you’re claiming and qualifying for every deduction you’re able to is key to reducing your tax burden. A few expenses that small business owners may overlook as tax deductions include:
- Vehicle Expenses – Not just mileage, but necessary maintenance.
- Office Supplies and Furniture
- Travel and Meals
- Phone Expenses
- Insurance Premiums
Just be sure that you always save receipts and invoices regarding anything you spend for the sake of the business.
Classify your business
Misclassifying your business on your tax return can result in major consequences, either resulting in you overpaying taxes or the IRS coming down on you for not paying enough. How your business is classified greatly affects how you file taxes and how much you pay. Whether you’re a sole-proprietorship for a home business, a limited liability company for most small businesses, or one of a variety of corporation, you should consult a tax lawyer or accountant to determine what classification best fits your business.
Do your personal taxes – determine your business and personal expenses
With your business taxes occupying your time and mind, it can be understandable if you forget to file your own personal taxes. If you happen to run a home business and are self-employed, your personal and business taxes are closely tied together. You’ll typically be classified as a sole proprietorship. You need to carefully separate business expenses from personal expenses.
A common expense that home businesses deduct on their taxes is related to a home office. In order to qualify for this deduction, the home office needs to be exclusively for use of your business and is the principal place of your business.
Another benefit to being in a sole proprietorship is that you can claim any business losses you suffer as a deduction on your personal taxes.
Request an extension
If the deadline to file your return is looming, but you believe you need more time put more work into it, don’t be afraid to request an extension from the IRS to your filing period. Businesses requesting extensions isn’t uncommon and are rarely declined.
The typical extension date is to October 15 from April 15, giving you an extra six months to prepare your return. However, keep in mind that an extension only applies to your actual return, and not to your payment of taxes you owe, which still must be paid on April 15. This means you must estimate the amount of taxes your business will owe and pay the IRS. After filing your return and determining your exact taxes owed, you will receive a refund or new balance owed.
Go to a professional
It can be immensely helpful to have an expert review your return before filing. Experienced CPAs can give you a whole new perspective on your taxes and the way you run your business. If book-keeping isn’t your forte, turning to a freelance accountant to at the very least review your work and point out a few places where you can improve, can help you not just with your current return, but all your future ones going forward. If you’re really unsure about your taxes and if you’re optimizing your income and deductions, the cost of hiring a CPA may very well be worth it.
Get a head start on next year’s taxes
After finally submitting your taxes for the year, we advise that you don’t just forget about it until next year’s tax season. Stay in this frame of mind to plan out how you can improve your processes going forward. Were there certain gaps in your accounting that may have cost you more had you kept better records? Are there any tools that could potentially make tax season less of a headache for you and lessen the impact on your business’s growth?
eFileCabinet is an immensely useful business tool that can make cataloging all your business’s expenses throughout the year so much easier. All of your business’s records can be available with just a few keystrokes to find. To see how eFileCabinet can help you conquer next year’s tax season, fill out this form to view a free demo.