It's Tax Time! Tips!

 

It’s Tax Time!

Oh, that dreaded Tax Season! Hopefully you have been tracking everything properly for your business, and if you have, it shouldn’t be so dreadful! Here are a few tips and helpers as you prepare to get your paperwork ready to do your taxes.

The mistakes listed below are just a few of the mistakes that the self-employed make with their income.

1.       New business owners often make the mistake of thinking they are too small for a separate account.

2.       Thinking that if they don’t receive a 1099 from their client, then the money isn’t taxable.

3.       New business owners are waiting until they’ve made a certain amount of money before considering their income as business-related.

Many self-employed also believe that they don’t have to keep track of their cash income. Just know that if you get audited, it will all come out in the wash, and you will have to pay your taxes on the cash income as well as any fines.  Also, by not tracking your cash income, your business analysis will look poor for any potential loan opportunities.

Make sure you are considering everything that is an expense for your business. The following lists will help remind you of anything that you might have forgotten or omitted!

Mileage is another thing that self-employed folks forget to track! Your CPA will consider your mileage vs. money spent on gas. I always took the mileage on my taxes because it gave me so much credit!!! Make sure you track it!

Below is a chart you can use as an example. I always kept track of my mileage in an excel spreadsheet. It did all the totaling for me. I always put a space at the top for the odometer reading at the first of the year. This is especially helpful for your accountant. Keep accurate records of your mileage in case you get audited. Make sure you list the destination and what the purpose was, i.e., meeting, supplies purchase, etc. Use mileage to your advantage!

Income versus Self-employment tax. Comparing Income tax to Self-employment tax.

There is usually a lot of sticker shock when a new entrepreneur realizes that they must pay self-employment tax! Yes, you are acting as your employer and must match your tax for social security and Medicare. Once you start earning a certain amount, you will want to pay your tax quarterly so that you will be compliant with the IRS and not have a huge shock with a tax liability at the end of the year. You can set up your own quarterly payments or have your CPA help you do that. Below is a chart to help you calculate the tax.

Above all else, know the difference between an accountant and a CPA. This was one of my earliest lessons that was learned when I was a very young entrepreneur!

It is best to hire a CPA to help with your taxes. There are so many laws and rules that change year to year for businesses and a good CPA will be on top of it and help you get the most benefits that you can take as an entrepreneur. Yes, CPAs are expensive, but it is worth paying for their knowledge and expertise. Build a report and make sure you tell your CPA everything about your business. They can only work with the information that you give them. Work with them every year as your biz grows so that information is never lost and listen to their advice for your business.

Another perk, if you should get audited, your CPA will be a great resource and a lot of help.

 

Debra Lee, DL Biz Services

Author | Keynote Speaker | Biz & Life Coach | Blogger

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