We’re nearing the end of the calendar year – and while that might mean celebration and merriment for most folks, for small business owners it means that tax time is looming. Your spending and income during the 12 months of 2014 are going to have a big impact on how much you pay in April. Why does that matter right this minute, with pages still left on this calendar year? Now is the perfect time to do a check-in with your accountant so you can be prepared – and avoid penalties.
According to Entrepreneur.com, poor record keeping, misclassifying workers and making late payments are the three biggest mistakes that small business owners make when it comes to tax time. But that doesn’t mean there aren’t other pitfalls.
Book some quality time with your accountant – or find a new one – and ask these important questions:
How does the legal structure of my business affect my taxes?
Your accountant isn’t a business structure expert – but they do know the difference between an LLC and solo business when it comes to filing taxes. If you are currently a sole proprietor, now is a good time to discuss options with both your accountant and a small business lawyer. You could have your incorporation paperwork filed before this year’s taxes are due and potentially save.
How much of my personal expenses related to my small business are deductible?
If you work from home, your business and personal life have a lot of crossover. Your home office, your car, household bills and equipment may all be deducted to a certain degree. Ask your accountant to review a list of potential personal expenses that are deductible. Your computer, printer, fax machine and Internet access could all help trim down how much you owe.
Can I do anything to increase my savings for the coming year?
Certain items – such as energy efficient appliances – can garner you bigger tax credits. If you’re planning on making major purchases for the business before the end of the calendar year, check with your accountant about these qualifications. By choosing a different model for business equipment you could be saving big.
Do I have contractors or employees?
You may have started out working with a virtual assistant a few hours a month, but their slow transition to full time employee could put you at risk for penalties. Present your accountant with an estimate of the time your contract workers have put in for your company. Be sure you’re within legal limits for keeping them as a contract worker rather than an employee.
What tax bracket am I expected to be in for the coming year?
Getting an estimate for your upcoming tax bill is an essential! You’ve likely been making quarterly payments throughout the year, but it’s always a good idea to figure out how much you’ll owe in April. Give your accountant your most current earnings numbers and get advice on how to deal with your expected tax bracket.
Fortunately, handing over your financial records is easy when you use a simple accounting tool like Sage One. You’ll be able to keep your accountant in the loop with easy-to-create reports – and be fully prepared for April 2015.
About the author:
Mike Savory – Customer advocate and automation engineer
I operate at the intersection between technology and ease of use. I strive to make our customers’ lives easier through elegantly automating manual processes. Much of my time is spent listening to small business owners, making sure to bring their voice to the table in everything I do. My free time is spent with my kids, which includes being a Cub Scout leader for an energetic group of 10-year-olds where I’m lobbying for a Software Product Management badge.