Monday, February 17, 2014

Filing Small Biz Taxes Early? 5 Things to Know

Deborah Sweeney for Fox Business writes: Filing season is officially upon us. Yes, April 15th is still months away, but the IRS has begun accepting 2013’s returns, and millions of Americans are getting ready to file their taxes. However, tax law can still be extremely complicated, especially for small business owners. I typically recommend that business owners meet with an accountant to maximize their deduction, but if that isn’t fiscally possible, the next best tax strategy is to research as much as you can before preparing your returns. For small business owners taking a crack at filing on their own, keep the following tax tips in mind.
1. Remember Your Home Office Deduction
Calculating your home office deduction used to leave your brain feeling like cold mush – this one deduction actually required an entirely separate form! While you can still technically use Form 8829 to calculate your home office deduction, the IRS has kindly introduced another option. This much simpler rule allots $5 per square foot of your office, up to 300 square feet. If your office is bigger than that, you can claim a flat $1,500 deduction. Now, this rule doesn’t help businesses that take up a large part of the owner’s home, but it will help save plenty of tax preparation time for the small businesses that are effectively confined to a home office.
2. Standard Mileage Rates Have Changed
The standard mileage rate for 2013 was 56.5 cents per mile, which was one-cent more than the rate for 2012. While that doesn’t sound like much, every penny counts and, if you drive around a lot for work, that one-cent increase could be a real boon. Also, anyone claiming standard mileage should note that the mileage rate is going to drop down to 56 cents in 2014. Be sure to check in with the IRS’s site to make sure you have the latest up-to-date information on deduction limits.
3. Section 179’s Limit Is Getting Slashed
Section 179 is a provision in the tax code that allows businesses to write off certain types of major purchases. For the past few years, the government has extended a $500,000 deduction limit for Section 179 purchases as a way to spur business investment and growth. Unfortunately, this limit has not been extended through 2014. While you can still claim up to $500,000 in your 2013 returns, that limit is going to fall back to $25,000 for this upcoming fiscal year. The most common purchases covered by Section 179 are business vehicles, office furniture, off-the-shelf software, and improvements to retail or restaurant property. If you made any major purchases within those categories in 2013 make sure you take advantage of the higher deduction limit while you can.
4. Self-Employment Tax Deductions
As you are calculating your adjusted gross income for 2013, don’t forget that you can deduct half of the amount you paid in self-employment taxes. If you were self-employed and paid for medical and dental insurance in 2013, the Small Business Jobs Act allows you to deduct those expenses as well.
5. Don’t Forget Next Quarter’s Estimated Tax Payments!
Estimated taxes cover what used to be taken out of your paycheck by your old employer; Medicare, social security, and basic income tax are all covered by your estimated tax payments. Most small business owners are also required to file quarterly estimated tax payments – the only exceptions are those who expect to owe less than $1,000 in taxes, and those who did not have to pay any taxes during the previous fiscal year. If you still feel lost here, IRS Form 1040ES has been made available to help calculate what you owe, and the deadline for 2014’s first quarter is the same filing deadline for your returns – April 15th.
Tax season is never fun, and the complex tax code in the United States, despite all the ease of filing faster online, can still leave plenty of people scratching their heads. If you need help with filing, I really do recommend hiring an accountant or other tax specialist. But if money is tight, you can go it alone. Just make sure to take your time, be honest, and don’t do it all in one sitting. Tackling your return bit by bit, section by section, minimizes the chance of making mistakes, and makes it easier to stay patient while filling out all of those forms.
Deborah Sweeney is the CEO of MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services.