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Tax Prep: 5 Ways to Be Prepared for Tax Time

5. January 2015 07:09

doing taxes

If you’ve always counted on certain tax breaks for your small business, I have some bad news. Many of the deductions you’ve been able to take in the last few years will be eliminated in 2015. These include: the work opportunity tax credit, which gave employers a tax credit for hiring veterans, and the energy tax incentive, which gave a deduction for implementing green practices in your business. Also, the Section 179 deduction, which allows business owners to deduct the entire cost of certain assets, has dropped to $25,000. Of course, most of 2015’s tax changes will come from the Affordable Care Act.

To avoid headaches at tax time, here are five things you can do now:

  1. Brush up on the tax rates for your business structure. Companies that are structured as corporations currently pay a higher tax rate than other business structures. Some states have already cut their corporate tax rate. If your business is structured as a corporation, you might see some reform this year, but it’s anybody’s guess what will happen with the new Congress.
  2. Keep thorough financial records. One of the top reasons many small-business owners might face problems at tax time is they didn’t keep good records throughout the year. Whether you use QuickBooks or some other accounting system, make sure you stay on top of your documentation. Prepare reports and financial statements regularly to chart the progress of your business. Good records will also protect you in case your business gets audited.
  3. Document all business expenses. Use the tools provided to you by your business credit card companies and bank institution to sync your accounts to your accounting program. Enter utility payments, operating expenses, and entertainment expenses. If every expense is accounted for, it will make your tax filing easier for your accountant.
  4. Separate business and personal expenses. If you work from home, make sure you separate your business expenses from your personal ones. Make it easier for yourself by setting up a separate business phone line and separate office to make the deductions easier to track. The IRS made the home office deduction easier than ever to figure out. Take the square footage of the home office space and multiply by $5 to get your deduction.  
  5. Sort out business entertainment expenses. You can work out your business entertainment expenses for the year by making sure your meals, travel, and entertainment expense receipts are in order. To be deductible, your meal costs must be business-related. If you take a client out to lunch, the cost of the meal must be an ordinary and necessary business expense (not lavish or extravagant) and must be directly related to the active conduct of your business or directly preceding or following a substantial business discussion. Also, the IRS has just announced the 2015 national optional business mileage deduction rate is 57.5 cents for US business drivers, effective January 1, 2015.

Taking the time to get your records in order now can save you endless back and forth with your accountant at the last minute. Use the time saved to concentrate on growing your business. 

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at [email protected], follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva's free TrendCast reports.

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Accountants & Bookkeepers | General | Home-Based Business | Small Business | Tips for All Small Businesses

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