April 15. For some home business owners, just the mention of that dreaded date is enough to give them an ulcer!. Navigating the world of local, state, and federal tax regulations seems impossible. Yet, you don’t HAVE to get lost! With just a little research and added knowledge, you’ll be able to successfully make your way through the labyrinth and arive succesfully on the other side. Here are five tips to help you get started in the right direction:
Tax Tip One: Learn the three “R”s
Records, records, and, you guessed it, records! Though it can take some organizational know-how and a lot of file folders, you’ll find that this is one of the single most important steps in avoiding the “A” word – an audit. Cover your tracks by keeping a copy of everything that pertains to the finances of your business. If that nondescript piece of paper holds information about any of your business transactions, then you probably want it! Other examples of things you should keep include check stubs, receipts, licenses, mileage records, etc. But there’s more to you record keeping than dumpingall this collected financial information into a couple file folders and letting dust gather until tax day looms. Be organized! Classify all those bits of information by type, using headings such “Business Receipts”, “Income Received”, “Mileage Records”, and so forth. When the time comes to find a particular receipt or invoice, you’ll thank your lucky stars that you have everything in such spick and span order. Trust me!
Tax Tip Two: Ask the IRS
You may feel like this is akin to negotiating with the enemy, but they really aren’t all that bad! In fact, this tax-collecting governement agency actually wants to help you and so they’ve compiled several useful tools for small business owners such as yourself. As the first antidote against tax-related health problems, visit the IRS Small Business website at www.irs.gov/business/small/. You just might be surprised at what you find. Answers to questions, useful forms and publications, and even a small business checklist, there is a whole range of tools that might answer many of your questions without too much time or trouble.
Tax Tip Three: Ever Used Software?
If you are like many freelance writers, you may be making a living, but you aren’t rolling in the dough! And that’s why you may want to consider a different route for getting your taxes done. Instead of forking all that hard earned cash over to an accountant, why not buy tax software instead? Both H&R Block and Intuit (the makers of Quicken) offer good tax preparation software that will walk you through the process step by step. There are different versions of the software, so make sure you get the one that’s geared toward small business owners.
Tax Tip Four: Check Your Deductions
Deductions can be a key to bringing down an otherwise hefty tax bill. Get out all those receipts for that year’s expenses (You did keep them, right?) If you bought a new computer, purchased a cell phone, obtained the latest copy of Microsft Word, or even got a new office chair, you can probably deduct them as business expenses. The main rule to keep in mind is that the item must be used more than 50% for business purposes. If it’s not, you can’t deduct it. Again, take a look at the IRS site. They have plenty of information to help you figure out what is and what is not deductible.
Tax Tip Five: Don’t wait until the last minute
As obvious as this one should be, yet millions of Americans somehow can’t get around to finishing their taxes before midnight on April 14th. Don’t be one of those procrastinators! The longer you wait, the harder it will be to not only get your taxes done but to get them done correctly! Save yourself a grey hair or two and get started on those IRS forms this weekend!
These tips should help get you started. But don’t let this be where you stop! You’ll find more helpful information and advice online at www.nolo.com, as well as offline at your local Small Business Administration office. And when April 15 comes? You’ll be relaxing and drinking a Starbucks! Remember, tax knowledge is tax power!