Friday, November 15, 2013

End of 2013 Tax Tips for Small Business Owners

There are only a few weeks left of the tax year. It's time to start planning for next year- and for tax season! Below are a few ways a small business owner can save money on taxes.
Track your mileage
The IRS mileage rate this year 56.5 cents/mile, meaning you get a deduction for.565 x the number of miles you travel for business. This is a good deal and is better than taking car expenses such as insurance and repairs, given the high cost of gas. Take advantage of this deduction, especially if you travel a lot for business! As with anything else keep a log of your miles so you have a record. You can use a day planner or notebook, or if you have a smart phone check out the app "Mile Bug". It's free and you don't have to deal with pen and paper when you're on the road.
Meals & Entertainment expenses
As long as you discuss business before, during, or after a meal with a prospect or client, you get a deduction for half of the bill. There must be a business purpose for the expense. Networking events are a good example because your goal is to build your network and ultimately, make a sale. Also if you have employees, and you buy them lunch, you can deduct 50%. These expenses tend to be scrutinized by the IRS, so substantiate everything in case you get audited. You could use a "Neat" scanner if you don't like to have paper clutter your desk- it scans your receipts and organizes them for you. Also, check out the free smart phone apps iSpending or Pocket Expense as another option.
Capital expenses
If you're thinking of buying a new computer or other business equipment, may want to do so before 12/31/13. This is a good way to lower your taxable income while also updating your business equipment- as long as you were going to do it anyway! We never advocate spending money for the sake of spending money, or to avoid taxes. There should always be a valid business purpose for the expenditure. That being said, if you are in the market for some new equipment, you get to take a 179 deduction. As long as your earnings are greater than the cost of the asset you get to take full deduction for business equipment!
Travel Expenses
If you go out of state to attend business conferences you are allowed to deduct 100% of your airfare, car rental, gas, meals, and other travel expenses that you incur. This includes conference dues also. Remember that all professional dues are deductible on your tax return.
Home Office
If you work at home you can take a deduction for your home office as long as you use the room only for an office and not as a guest room. The IRS is very strict in its guidelines for taking this deduction so read the rules on http://www.irs.gov before taking this one. If you can take it, it means you also get to take the proportion of your home mortgage interest, home insurance, utilities, etc. also. For example, say the square footage of your home office is 15% of your house- you get to deduct 15% of your home expenses on your schedule c! Talk with your tax professional about your particular situation.
Independent Contractors
Throughout the course of the year you may have hired outside work for consulting or other services. Keep track of who you pay and how much. If you paid someone over $600 then you have to issue them a 1099. This requires you to get the forms (Staples has them) and print them out and mail them, and there is a deadline to do it in the beginning of the year. If you use QuickBooks it's very easy to pull a report of all 1099 eligible vendors. You should ask contractors to send a completed W-9 form with their tax id so you can enter this in your accounting system. Then print out the forms and send a copy to the contractor and one to the state, and the federal government. For more information and deadlines, check out http://www.irs.gov
Now is the time to talk with your tax advisor about what you can expect to pay on 4/15/14. Especially if you own a small business, don't wait and wonder. You don't want to receive a nasty surprise come tax day, and not have the cash to cover the bill! 


Article Source: http://EzineArticles.com/8084815

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