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While your thoughts at the end of the year are probably filled with everything from next year's budgets to holiday vacation plans, don't forget that tax season will be upon us before you know it. Leaving everything for a last-minute cram session could disrupt your business in the spring. To avoid a crunch, you should get prepared for tax deadlines well in advance.
Look for deductions. Looking for ways to reduce your taxes can be a great help to your business. In general, you can deduct expenses that are both ordinary and necessary. According to the IRS, an ordinary expense is one that is common and accepted in your trade or business, while a necessary expense is one that is helpful and appropriate for your trade or business. Note that an expense does not have to be indispensable to be considered necessary.
One helpful document from the IRS, Publication 535, can help to explain what you can deduct. Some deductions that are worth considering include the following: bad debts, depreciation, employee wages, insurance premiums, interest, employee pension plans and benefits, and rent expenses.
Hire an accountant. One deduction that may be a great investment is finding an accountant to help prepare your taxes. If you've already got an accountant who keeps your books in order, they should be up-to-date with IRS regulations. If you're hiring an accountant just for this tax season, spend some time on the phone before your first meeting so that you'll have the necessary items prepared. Remember, your accountant should not just do your taxes for this year, but also advise you on the things you'll need to do to plan for next year's taxes.
If you're planning on doing taxes yourself, the IRS Web site has some helpful products, including a tax calendar with important deadlines. In any case, getting on top of your taxes now will make life easier (and less costly) when the deadline arrives.
- Meet Barak Goodman and Rachel Dretzin of 10/20 Productions, who discuss the particular challenges they face in preparing the taxes for their company, an LLC.
- Access articles on 25 common business deductions and expenses, 10 ways to pay less in tax, avoid these common errors and audit triggers, understanding the home office deduction, how to get an extension, selecting the right accountant for your business, corporate income taxes primer, employment taxes primer, personal income taxes primer, sales tax primer, and property taxes primer.
- Find out Fred Steingold's answer to the question, "I recently started a business. I want to be sure everything is in order when tax time rolls around. What steps should I be taking?"
- Read a profile of James Weikart, a partner and founder of Weikart Tax Associates, a New York City accounting firm specializing in the publishing industry.
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