April 17th is next Tuesday, and if you haven’t started thinking about taxes, it’s time to start. These tips can’t replace the advice of a qualified tax professional, but they’ll certainly help you get ready for filing time.
Take your deductions wisely
As a business owner, you want to reduce taxable income and take advantage of as many deductions as possible. Don’t get too deduction crazy, though.
Some deductions are more likely to trigger a call or letter from the IRS, so it’s important to be honest in your assessment of what counts as a business expense. If you aren’t sure about a deduction it’s always best to consult with a tax professional.
A note on mixed use deductions
Some companies use things like vehicles and cell phones for both personal and business purposes. These assets are considered “mixed use” and the percentage of the cost that’s business-related can be deducted from your taxes.
Most tax professionals will suggest you divide the total cost between business and personal use to come up with a percentage. You would then deduct the percentage of the cost that went toward business.
Learn about tools and technology that can streamline tax filing
If your record keeping has been lackluster, tax season is the perfect time to get a better system in place for years to come. The IRS requires documentation of income and expenses, and while it doesn’t matter how you keep these records, you must have them.
Luckily, there are tons of easy-to-use tools available that can streamline how you keep track of expenses. To start, try an app like Everlance. This straightforward tool automatically tracks mileage via a smartphone app, and you can easily mark a trip as personal or business right in the app.
Once you’re tracking mileage properly, consider adding other tools to your arsenal. Shoeboxed is one powerful option that makes tracking receipts nearly effortless.
Hire a qualified CPA
There’s no way around it: business taxes are complicated. To make things even trickier, the law changes regularly as new legislation is introduced and phased out.
That’s why it makes sense to hire a tax professional, such as a CPA, to help you prepare and file your taxes. A tax professional will ensure you get the deductions you’re entitled to, help organize all of the necessary paperwork, and is a great resource for any questions.
Working with a professional also reduces your chance of making errors that lead to an IRS audit. If that’s not a compelling enough reason to hire a CPA, we don’t know what is!
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