Archive for January, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
One of the biggest hurdles you’ll face in running your own business is how to stay on top of your obligations to federal, state, and local tax agencies. A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records.
Here is a list of some common small business tax misconceptions:
1. All Start-Up Costs Are Immediately Deductible
Business start-up costs are the expenses you incur before you actually begin business operations. Your business start-up costs will depend on the type of business you are starting. They may include costs for advertising, travel, surveys, and training. These costs are generally capital expenses.
You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation. You can elect to deduct up to $10,000 of business start-up costs and $10,000 of organizational costs paid or incurred in the year that you start a business. The $10,000 deduction is reduced by the amount your total start-up or organizational costs exceed $60,000. Any remaining cost must be amortized and you must spread out the remainder of your start-up costs over 15 years (180 months).
2. Being incorporated enables you to take more deductions.
Aside from health insurance, deductions for the self-employed (sole-proprietors and S Corps) are very similar to corporate deductions. For many small businesses, being incorporated is an unnecessary expense and burden..
3. The home office deduction is a red flag for an audit.
This is no longer as true as it once was. Because of the proliferation of home offices, tax officials cannot possibly audit all tax returns containing the home office deduction. A high deduction-to-income ratio tends to lead to an audit.
4. If you don’t take the home office deduction, business expenses are not deductible.
You are still eligible to take deductions for business supplies, business-related phone bills, travel expenses, printing, wages paid to employees or contract workers, depreciation of equipment used for your business, and other expenses related to running a home-based business, whether or not you take the home office deduction.
5. Taking an extension on your taxes is an extension to pay taxes.
Extensions enable you to extend your filing date only. If you do not pay taxes on time, penalties and interest begin accruing from the due date.
|
|
Tags: myths, tas season, Tax
Posted in Accounting, Auditing, Tax, small business | No Comments » |
|
|
|
|
|
|
Gather and organize RELEVANT receipts. Examples include:
- Charitable Contributions* – You must have a written acknowledgement from the charitable organization to support donations of $250 or more.
- Medical Expenses* – If you believe your unreimbursed medical expenses for 2011 exceeded 7.5% of your adjusted gross income, you will need to add up the receipts for all of these out of pocket costs. If your medical expenses weren’t that much, don’t bother.
- Sales Tax* – You can elect to deduct state sales tax paid during 2011 in lieu of state income taxes. The IRS provides a table for calculating your state sales tax deduction based on your income for the year. If you prefer, you can add up the actual sales tax you paid on all of your 2011 receipts to calculate your deduction. If you made a major purchase, like buying a car, the actual sales tax paid on this transaction can be added to the amount from the IRS table. So, you should at least find the receipt from your car purchase.
- Real Estate Taxes* – Keep the receipt for the real estate taxes you PAID in 2011. If your real estate taxes are paid through your escrow account, your deductible amount will probably be reported on the 2011 Form 1098 that you receive for mortgage interest.
- Unreimbursed Business Expenses – Receipts are needed to claim this deduction.
- Child or Dependent Care Expenses – Request a statement from the care provider reporting the expenses you paid during 2011. You may be eligible for a tax credit.
- Energy Efficient Home Improvements – You may be eligible for a tax credit if you made energy efficient improvements to your home during 2011. You will need the receipt evidencing payment for these improvements as well as a tax credit certification statement from the manufacturer of the improvement property. Here are more details on the credit: http://www.irs.gov/newsroom/article/0,,id=249922,00.html
*Note: These deductions are only applicable if you can itemize.
- If you are a business owner, landlord, or farmer, hopefully you have kept track of all of your 2011 income and expenses from these business activities. At the very least, you should use a separate checking account for each business you operate. There are many types of accounting software that can help you record the business activity. Talk to your CPA if you have questions about accounting for your business income and expenses.
- Keep the 2011 year end statement from your Health Savings Account and Individual Retirement Account. Your contributions for 2011 may be tax deductible. Also, you have until the due date (without extension) of your income tax return to make deductible contributions for 2011.
- If you made quarterly estimated income tax payments to the US Treasury for 2011, list the dates paid and amounts paid. These will be subtracted from your total tax liability. Remember that the fourth quarter estimated tax payment for 2011 is due January 17th, 2012.
These steps will help you whether you prepare your own return or provide this information to your CPA. Don’t hesitate to ask your CPA if you have any questions. Good luck!
|
|
Tags: tax prep, tax preparation, tax season, ways to file for taxes
Posted in Accounting, Entrepreneurship, Tax | No Comments » |
|
|
|
|
|
|
Ways to Prepare for Taxes
It’s that time of year again! The New Year starts the countdown until April 17th, 2012 (i.e. the due date of your 2011 individual income tax return). The best way to make the preparation of your income tax return as painless as possible is to be organized and thorough. Here are some steps for doing so:
Collect all of the tax documents mailed to you in one file. Some common forms you may receive:
- Form W-2, Wage and Tax Statement – If you were an employee during 2011, this document must be provided to you by January 31st, 2012.
- Forms 1099-INT, Interest Income, 1099-DIV, Dividends, 1099-B, Proceeds – You probably won’t receive these documents reporting your 2011 investment income until the middle of February.
- Form 1099-MISC, Miscellaneous Income – If you were an independent contractor during 2011 or received rents, royalties, etc., this document must be provided to you by January 31st, 2012.
- Form 1099-R, Distributions from Retirement Plans, IRAs, etc. – This document must be provided to you by January 31st, 2012
- Form SSA-1099, Social Security Benefit Statement – This document must be mailed to you on or before January 31st, 2012.
- Form 1098, Mortgage Interest State – This document must be furnished to you by January 31st, 2012.
- Schedule K-1 – These forms are issued to S Corporation shareholders, beneficiaries of trusts, and partners in partnerships/LLCs. You could receive these forms anytime from February through October. It just depends on when the tax return for the S Corporation, partnership, or trust is prepared. Thus, you may need to extend your individual income tax return if you are waiting on a Schedule K-1.
These steps will help you whether you prepare your own return or provide this information to your CPA. Don’t hesitate to ask your CPA if you have any questions.
|
|
Tags: business owners, prepping for taxes, tax prep, tax season
Posted in Accounting, Entrepreneurship, Tax | No Comments » |
|
|
|
|
|
|
Vacations are something that most people look forward to every year. But people taking vacations can make it difficult to maintain the operations of a business. How do you fill in for the person on vacation for the week? How does a business owner take a vacation without constantly checking in?
Cross Train Employees
Just because an employee goes on vacation does not mean that the work can stop. A company has to have the ability to shift the responsibilities of the person to others in the department. The best way to ensure that a person going on vacation does not impact your business is to cross train your employees. It is also a good idea to have a trial run. Have a week where everyone will perform other people’s jobs.
Enable employees to make decisions
As a business owner you will also need to get away at some point. Just as you cross train employees you will have to enable your employees to make the critical decisions necessary while you are gone. Giving employees the skills and ability to make these decisions will also benefit the company even when the owner is not on vacation. As an owner you will not be present on every phone call, customer visit or meeting with a supplier. Your employees will be is situations where a quick response will be very beneficial to the company. (more…)
|
|
Tags: holidays, make money, travel, vacation
Posted in Entrepreneurship, small business | No Comments » |
|
|
|
|
|
|
|
|
You are currently browsing the Price CPA's Blog blog archives
for January, 2012.
|
|
|
|
|
|
|
|
|
