Depending on where you live, a good majority of entrepreneurs have already witnessed wild weather patterns since the start of the New Year. According to most calendars though, spring has officially sprung. And according to Uncle Sam, time of that impending tax deadline is drawing near. Tax season can be a time of panic and stress as you scramble to get receipts in order to meet deadlines and avoid penalties.
Kansas City, Missouri accountant and tax advisor Marquita Miller shares a few valuable tips to help business owners with tax planning, preparation and preventative maintenance:
Filing An Extension
The IRS requires each taxpayer to file a complete and accurate return but there are times when the deadline catches up to you. An extension provides more time to file but not more time to pay. If you won’t have a tax balance then you can file an extension with no payment. However, if you will owe taxes, your extension should be filed with estimated payment(s).
Mileage deduction can be a great tax benefit for business owners. It’s important to maintain a mileage log that captures: trip descriptions, dates, miles, tolls, and parking costs. You can total your business mileage and multiply by 56.5 cents for 2013 deductions or measure business usage against personal driving and deduct that portion of auto-related expenses. Other applicable expenses include gas, repairs and insurance. If you’re leasing a vehicle for business, include associated payments. If purchasing the vehicle, factor in the loan interest and vehicle depreciation.
Checks and Balances
Everything needs balancing and your tax return is without exception. If you sell a product, then the total sales revenue should equal the amount reported to the State for sales tax purposes. If you list that you’ve paid wages as a deduction, then you should have filed payroll tax returns and paid payroll taxes. Contract Labor is a big item that some small business owners have a hard time with. For example, if you’ve paid a person and/or company $600 or more for services in the calendar year then you could have a 1099 reporting requirement.
You owe but don’t have the cash flow to pay the IRS. The million dollar question is should you file when you get the money or go ahead and file now? You need to file your return now to avoid non-filing penalties. Did you know you can request an installment agreement and make monthly payments? If you need 90 days or less then you can request additional time to pay. Both options will incur interest. If you owe (in one or more tax years) then it’s critical as a business owner to get out in front of a potentially fast forming snowball. Keep in mind that you could be required to make estimated payments on the following year’s taxes. Beware of tax snowballing, this could avalanche any business so don’t let it happen to yours. Visit www.irs.gov to learn more.
Prudent Business Practice
As a disciplined business owner, it’s your responsibility to operate in prudence and excellence. Lack of knowledge won’t get you a “do not collect $200â€ pass in most cases with the IRS. Proper tax planning for small business owners typically starts at the beginning of the year. It’s imperative to have sound accounting performed that’ll provide accurate financial statements. These reports serve as a roadmap and provide key indicators to help you make better business decisions saving you time, heartache, headache and or course, money.
Marquita Miller owns and operates Five Star Tax and Business Solutions focusing on tax planning and preparation, accounting and payroll, startup planning, financial and performance evaluation planning, and revenue generation. FSTBS is a certified woman-owned and minority-owned business. www.marquitamiller.com. Twitter: @MarquitaMMiller