Taxes are sort of like college, if you think about it.
Sure, you might not be throwing all-night keg parties to get ready to fill out your 1099, but chances are – just like with long papers and final exams – you put off all the work until the last minute. Only in college, if you messed up the worst thing that happened was you got a bad grade. Mess up your business taxes and, well, you may have some serious consequences.
So as you scramble through and pull all-nighters in your Dave Matthews T-shirt to get your taxes in this year, here are some important tips to make sure you don’t totally bomb it.
Calling an accountant the night before your taxes for your small business are due is like showing up at a restaurant on a Saturday night without a reservation; they’re beyond busy, and won’t be much help. But what you can get is electronic help in the form of computer programs and online tax resources for small businesses.
QuickBooks is probably the most common program you can get to simplify your tax prep. Websites like TurboTax can also be a much bigger help than you think. It’ll cost you more than the “free eFile” they offer individuals, but any help is worth the money at this point.
In a mad scramble to bring down your tax bill, you’re probably trying to figure out every possible deduction you can. But be careful. Zogby Analytics polled 400 accountants and found that not understanding deductions was the second-largest tax problem for small businesses.
Further, 43% said their clients over-deducted when it came to income, while 30% tried to deduct vacations as business trips, and 15% tried to write off their pets.
And while Sparky usually can’t be considered a viable expense to your business, your home office can. But it’s also one of the most over-deducted items on any small business return, and a good way to set yourself up for a tax audit by the IRS.
Remember: Your home office must be a room used solely for business purposes. Not your mother-in-law’s room that has a computer. Not your kid’s room where you work on a laptop while you watch the baby. It must be a designated office space or it’s not wholly deductible.
And for deductions under $1500, the IRS offers a new simplified home-office deduction form, far simpler than the old way. But you can still use that if your expense is over $1500.
Know What You Can Deduct
Out-of-pocked expenses rate as the largest deduction small business owners overlooked. So remember your meal costs, mileage, gas, auto repairs, and other things you had to pay for to keep your business going.
The new Section 179 allows you to deduct the ENTIRE cost of new equipment for this tax year, which can be a huge help if you bought some big-ticket items. Software and computer programs also fall under this section, which previously only allowed deductions over time as assets depreciated. Make sure you are aware of any recent changes to the tax code that may impact your small business taxes.
Self-employed health insurance is another big deduction, as well as tax credits you can take for employed unemployed veterans.
And finally, you can still contribute into your IRAs for tax year 2014 up through April 15. Just remember, you had to have actual income in 2014 to qualify for this deduction, so if business was bad this year, well, the news just got a little worse.
Make Sure You Got Everything Right
Sort of like forgetting to put your name on a final exam because you were so tired from being up all night studying, business owners make careless mistakes on their taxes all the time. This can result in anything from your return being sent back to possible penalties. So …
Go through and make sure you’ve signed and dated EVERYTHING
Double check social security numbers for yourself and employees
Make sure you’ve attached every necessary form
Ensure all your numbers add up
Finally, if you are self-employed, remember your first estimated tax payment for 2015 is due April 15, so don’t think you’re done once your return for 2014 is out the door.
Preparing taxes for your business is never fun and, at this point, it’s a bit late to encourage you to get them done early. But if you do find yourself in a last minute dash, don’t do what you did in college and give it minimal effort just to pass. Uncle Sam grades a little harder than your old professors.