Tax time for small businesses is typically very stressful. With the April 15 deadline approaching, now is the time (if you haven't already) to get started on preparing your taxes. While researching for this week's tax tips and blog, I came across many tax tips that I didn't know about. Check out my Top 10 Tax Tips!
- File Your Tax Return for Free - The IRS Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies. Free tax preparation and filing via online software is available to anyone with a 2009 Adjusted Gross Income of $57,000 or less. If that’s you, head to the IRS website and choose from a list of approved tax preparers, and get started. If you aren’t sure which preparer to use, answer a few quick questions and the Free File program will suggest some matching companies. (read more at Precept Law Group)
- Go Green - Federal and state governments are throwing money at small businesses in the form of tax incentives for environmentally friendly initiatives--from solar panels to energy-efficient washers and dryers. In Georgia, for example, a new Clean Energy Property Tax Credit program will dole out $2.5 million a year over the next five years, says Peter Stathopolous, a director at accounting firm Bennett Thrasher PC in Atlanta. In some states, small-business owners can use green credits to offset both corporate and personal tax bills. For a comprehensive list of incentives, check out the Database for State Incentives for Renewables and Efficiency. (via Forbes.com)
- Employ Your Children - Doing business with family has its challenges, but at least it comes with a tax benefit or two. Putting Junior on the payroll means he's qualified to begin contributing to a Roth IRA, a smart way for him to start saving for retirement. Another perk: Assuming your boy stays in the business, by putting him on the payroll you are essentially shifting a portion of the company's income into a lower tax bracket--his. You also receive a larger tax deduction for a dependent earning a wage than one who doesn't, notes Richard Dauman, a principle at Bessemer Trust. (via Forbes.com)
- Deduct Your Business Startup Costs - Every new business incurs start-up costs for a variety of things such as market research, training, and fees paid to consultants, accountants, and attorneys. The good news is that most of those costs are deductible, but the bad news is that the rules for deductibility and timing are not as clear as those for operational expenses. Section 195 of the Internal Revenue Code is the main provision related to the deductibility of start-up costs. According to this section, deductible start-up costs are those that would be deductible if they were incurred by an existing business. (continue reading at The Enrepreneurial Advocate)
- Depreciation is Your Friend - "Be sure to maximize the depreciation deductions available by using the Section 179 immediate deduction of certain fixed assets and the 50 percent bonus depreciation for purchasing new assets," said Claude A. Titche III, CPA, Tax Partner at Beene Garter in Grand Rapids, Mich. "Quicker depreciation expenses save tax dollars for other important purposes. Remember that you only get to deduct the cost once. A current deduction is better than a deferred deduction." (via Moore Stephens North America Inc.)
- IRS Resource for Learning About Business Taxes - Bootstrapping entrepreneurs need as many low to no-cost resources as they can get their hands on to start and run their businesses. A good, free resource for start-up tax information to check out is the IRS Virtual Workshop. The surprisingly modern interactive site is designed to help new businesses owners understand federal tax obligations and procedures. Users can choose from nine different lessons. (continue reading at Precept Law Group)
- Watch Out for Surprises From Out of State - "Small business owners need to review their state filing requirements for income tax, personal property or sales and use tax," advised Joel Rothenberg, CPA, Tax Partner at DiCicco Gulman and Co. in Boston. "The states are very aggressive in enforcing their laws and small business owners need not only be aware of the rules in their home state but determine whether their activities in other states trip a filing requirement." (via Moore Stephens North America Inc.)
- Check, Check, and Re-Check - Re-examine every purchase, every expense you made in 2009. Make sure you've taken all the business tax deductions you are entitled to: expenses you didn’t record in your ledgers, expenses you didn’t think were deductible, “personal” expenses that qualify as business expenses. Neither the IRS nor your accountant is going to know about a deduction you forgot to take. It's entirely up to you. (via PowerHomeBiz.com)
- Take Advantage of the New Rules for Business Losses - "Small business owners need to plan for their net operating losses (NOLs). An election must be made at the time the 2009 tax return is filed to either carryback or carryforward the current year NOL. The taxpayer needs to look at the tax rates and income levels in the prior years. If they were not substantial and income is expected to increase in the future, it may be better to carry the loss forward," said Stacey J. Dell, CPA, Tax Partner at Mohler, Nixon & Williams in Campbell, Calif. (via Moore Stephens North America Inc.)
- Report Large Cash Payments - Listen up, members of the under-the-table crowd: Cash transactions greater than $10,000 must be reported to the IRS, via Form 8300, say AGH's Blue. That mandate goes for payments with cashier's checks, traveler's checks and money orders as well. Part of the information you'll need to complete a Form 8300 is the social security number of the buyer. (Beware buyers that give you push back--they may not want to be on the IRS' radar screen.) One weird caveat: While selling personal real estate doesn't require a Form 8300 filing, selling a mobile home does. (via Forbes.com)
Finally, one last big THANKS to Kyle Durand, an entrepreneurial adviser and legal expert on all things small business. Kyle has been the source this week for our tips, and has given us great advice to pass along to you. His business, Precept Law, specializes in helping small businesses legally. Find some great tax tips on the Precept Law blog . Visit Kyle Durand at www.entrepreneurialadvocate.com and www.preceptlaw.com , or join his conversation on Twitter at http://twitter.com/kpdurand.