I know what you’re thinking. 2017 hasn’t even come to a close yet and we’re already talking taxes?!
You bet we are. We’re small business accountants, after all. We basically talk taxes all day, every day!
In all seriousness, though, when you’re a small business owner it’s never too early to begin planning for your upcoming tax return.
Follow these 5 steps to ensure your paperwork stays organized, your deductions are maximized and you’re not faced with a tax-time meltdown come spring.
Make sure your business is properly classified
If you own your business, there are several different ways you can be classified in the eyes of the IRS. Before the year ends, you’ll want to make sure you’re using the classification that will help your bottom line most.
For example, if you’re a sole proprietor or single-member LLC with no employees and you earn over a certain amount, you could see a significant savings on self-employment tax by electing S-Corp status instead. This is just one example of many that might apply to you depending on your business type and your financial situation.
Do your research to find out which classification is right for you. If you’re unsure, we highly recommend scheduling one of our free tax planning sessions to discuss your options.
Collect contractor information
If you work with freelancers or subcontractors to help you run your business, you’ll need to issue a 1099 form for each one who you’ve paid more than $600.
Though you won’t prepare the form itself until the year has ended, you can save lots of time by collecting their information now. You’ll need each contractor’s tax ID or social security number and address to properly fill out the form.
Keep a running list of questions
Can I write off that donation I forgot I made last year? Are my doctor visits tax deductible? These are the questions that pop into your head while you’re driving or making dinner or just running your day-to-day operations, and keeping a running list of them will save you anxiety attacks come tax time.
Chances are your bookkeeper is going to be very busy between February and April. Going over these tax questions up front will ensure communication doesn’t feel rushed and nothing important is forgotten six months down the road.
Compile receipts electronically
Still filing receipts away in a ratty old manila folder (or losing them entirely in the abyss of your wallet)? Stop the madness! These days there are tons of free apps that make saving and tracking receipts a breeze.
We like the aptly titled Receipts, which allows you to easily snapshot your receipts, upload them and categorize them based on your most frequent business purchases. Bonus: if you use the note-taking app Evernote, Receipts syncs with your account to back up all of your information.
Consider upcoming legislation
You’ll want to work with an account who’s in the know about upcoming tax legislation that could affect your company. For example, a tax break that’s good this year might expire by next year, so you’ll want to maximize its impact accordingly for your business.
It’s also a great idea to talk with your accountant about any big purchases you’re considering, like equipment or new inventory; in some cases you can benefit by springing for those big ticket items before the year is up.
Have tax questions? Want to make sure you’re positioning your business for maximum savings? Schedule your one-on-one free tax planning session with one of our dedicated small business tax preparation experts now!