MYSUPPLIES BLOG

How to Avoid the Tax-Time Scramble

If you're like most business owners, you focus your efforts on building your business not being a tax expert. That's why so many of us scramble at the last minute to collect and organize a year's worth of receipts, credit card and bank statements. While it's true that business taxes are usually more complex than taxes on the personal side and require more paperwork and records, it doesn't need to be overwhelming if you gather all the needed paperwork for your accountant ahead of time. This way you'll be able to take full advantage of the tax benefits you're entitled to and avoid penalties. Be sure to have the following income and expense documentation on hand.

Business Income
  • Receipts for sales or service.
  • Sales records (for accrual-based taxpayers).
  • Beginning and ending inventory along with purchases or items removed for personal purposes.
  • Returns and allowances.
  • Interest earned on checking or savings accounts.
  • Any other income.

 

Business Expenses
Business expenses are subtracted from the overall income of your business to determine profit and tax liability. You should have receipts detailing all expenses incurred by the business over the year. The IRS (www.irs.gov) offers tips on whether a business expense is deductible or not. Typical expenses include the following:
  • Wages and payment to subcontractors.
  • Office supplies. Pens, paper, printer ink, etc.
  • Business-use vehicle expense. Mileage, repair and lease expenses may be deductible.
  • Utilities.
  • Office space rent.
  • Home office expense. Small businesses operated out of the home are entitled to deductions based on the percentage of the home used for business. For example, insurance, utilities, and home repairs may be partially deductible. To qualify, your home must be your main business location and a specific part of your home must be designated for business purposes.
  • Repairs, maintenance and cleaning of business facility.
  • Interest spent. Mortgage or business loans including bank and credit cards.
  • Transportation. Vehicle mileage and any receipts for public transportation, parking, and tolls.
  • Out-of-town travel. This may include airfare, hotels, office rental, meals up to a certain amount, taxes, tips, internet connection, and local transportation.
  • Advertising expenses.
  • Entertainment. According to the IRS, in order to deduct entertainment you must show the main purpose was active business, and you had a general expectation of future business. Other guidelines may apply or even allow for additional deductions. See I.R.S. Website.
  • Depreciation schedules. Initial cost and date of assets purchased, sales price and date of assets sold.
  • Employer-paid benefits. For example, health insurance premiums and profit sharing.
  • Retirement funding. Small business owners can deduct contributions to retirement plans.
  • Business insurance.
  • Attorney or legal fees.
In addition to the above, bring along any correspondence you may have received from the IRS during the year. After you complete this year's taxes, allocate time on your calendar each week or month to maintain good records. Organizational tools, filing systems, and accounting software available at your local Office Supply Dealer can help ensure you've got everything in order next tax season. Happy filing!


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