With the 2013 tax season over for small biz owners, it’s time to put focus on being better prepared for when the 2014 tax year wraps up next April.
What are some things you should keep top of mind for the remainder of 2014? Here are a few tips to help keep you and your business on the right track.
• Keep good – really good – accounting records
Accurate and timely bookkeeping needs to be a priority so you capture your business revenue and expenses throughout the year with precision. Have a system in place for tracking the money that comes into and goes out of your business. You might want to consider Quickbooks or Freshbooks to serve that purpose. And if you’re not sure about how to set it all up or use it, consider outsourcing that work to a bookkeeping professional. Yes, it will cost you something, but it could save you time, hassles, and money (think forgotten tax-deductible expenses) in the long run.
• Ask for W-9s from independent contractors
If you’re outsourcing any work to independent contractors or freelancers, ask them to complete and send you a W-9 form. W-9s document their Taxpayer Identification Number or Social Security Number. They indicate those people are contractors/vendors, not employees, and taxes will not be withheld from the compensation you’re giving them.
• Send 1099s to independent contractors after year end.
If you pay independent contractors and vendors (other than most corporations) more than $600 throughout the tax year, you’re required it issue them a 1099-MISC form. That form identifies how much you paid that vendor during that tax year. You can find more information about them and when there are exceptions on the Internal Revenue Service’s website.
• Remember, the business mileage deduction rate decreased from last year.
When tracking your business mileage and deduction amounts, you’ll need to use $0.56 per mile this year instead of the $0.565 per mile you used to calculate your deduction last year. The deduction for volunteer mileage remains at $0.14 per mile.
• Keep tabs on your quarterly estimated tax payments
If you’re self-employed, a sole proprietor, S-Corp shareholder, or partner and are making quarterly estimated tax payments during the year, let your tax professional know if your taxable income is trending differently than forecasted. Depending on the variance, you may want to adjust the amount of your quarterly payments going forward.
While most small business owners generally don’t enjoy tax return filing time, good preparation makes a difference. With your i’s dotted and t’s crossed throughout the year, you’ll find it a much smoother – and less stressful – experience.
Disclaimer: The information in this post is for general information purposes only and is not meant to serve as a substitute for professional accounting and tax advice.