Every year, millions of taxpayers decide to perform complex tax preparation by themselves and many don’t find it to be easy, let alone enjoyable.
- Should I Hire a Tax Pro for My Business
Tax returns for those who only have one source income might be easy, but for those with complex income sources, filing a tax return is never easy.
For small business owners, there are many reasons why seeking the expertise of a professional can save time, money and potential legal complications. To begin with, a tax professional is better than performing your tax surgery, because it can seem as complicated as a real surgery. Adding to the complexity are the new tax laws are enacted every year that affect virtually everyone. Keeping up with changes and how they might affect you is time-consuming and often challenging. For small businesses that have to manage income tax withholding and reporting for its employees, taxes are even more complex. There’s also healthcare reporting.
While tax software can help, an experienced tax professional “has seen it all before,” and his or her business is to keep up with the changes.
According to the IRS, the average taxpayer spends 13 hours preparing their return. Time is even more valuable than money as you can put these valuable hours to better use, either to advance your business or to enjoy your loved ones.
Along with saving you hours of painfully boring paperwork, experienced tax professionals also know all of the deductions that you your business may qualify for. They can also advise you if it’s more beneficial to itemize or take the standard deductions. Also, the taxes you pay this year can affect the taxes you will owe next year and they can see the bigger picture. This is why most tax professionals would like you to meet with them before it’s time to do your taxes, while there is still time to take proactive steps to reduce your taxes.
Avoid costly mistakes
Even simple math errors can cause a return to be inaccurate, and any error can cost you big time. For errors the IRS believes are not accidental, criminal prosecution accompanies the large fine. In the tax world, avoiding mistakes equals to saving a lot of money and sleeping peacefully at night.
- Small Business Tax Prep Tips
Running a business is hard enough without the complexity that taxes add to the equation each year. There are a few best practices your business can benefit from.
Hire the right accountant
Your accountant should offer to do more than just do your taxes. He or she should work with you throughout the year to track both income and spending and to prevent you from getting into trouble. A good accountant gives you advice on how to grow your business as well and can tell you if buying rather than renting could save you money.
Keep adequate records
With inadequate record keeping, puts you at risk for an audit. Keep records daily and don’t miss a thing.
Separate business from personal expenses
If you’re audited and the IRS finds personal expenses in there, regardless of whether you reported business expenses correctly, they will start looking at your personal accounts.
Correctly classify your business
Failing to properly classify your business could result in overpaying taxes as every classification has a different tax treatment.
If you acquire a tangible piece of property or equipment for your business, you may be able to take a significant deduction, as long as your accountant knows the rules of capitalization.
- Business Tax Deductions and Credits
Most small businesses pay more tax than necessary because they don’t take advantage of business tax deductions and tax credits.
Although The 2017 Tax Cuts and Jobs Act tax made all entertainment costs non-deductible for businesses, you still may be able to deduct 50% of business meal expenses that formed part of an entertainment event if you can separate out the cost of the meal and as long as it was an ordinary and necessary business expense. Also, the cost of the meal can’t be extravagant.
You could be eligible for green tax credits for your Centerpoint Energy utilities if you invested in energy-efficient windows and heating and cooling systems at your business facility.
Corporations and S corporations can deduct charitable deductions, but other businesses cannot. You may deduct cash contributions, gifts of property or equipment (“in-kind” contributions), mileage and other travel expenses incurred in working for a charitable organization, based on the IRS-designated standard mileage rate for charitable work.
Running any business, big or small, is complex, so seeking the expertise of a professional can save you time, money and potential legal complications.