Every year some folks are rushing to figure out their taxes at the last moment. Some of us are prudent enough to start thinking about tax season in December or January. But, why wait to start planning when we know its coming?
Its never too early to start thinking about your 2013 taxes. It would be prudent for all of us to sit down with a CPA or tax attorney early on to discuss our finances and ways we can reduce tax liabilities. It might save you some money in the long run. So in the spirit of the Tax Season, we thought it would be worth sharing a webinar on tax planning with you once more. We also highlight the top ten tax issues that small business owners face each year, as explained by tax attorney, Scott Estill.
No worries if you missed the webinar, you can still watch it and download the slides here for free. No time to view the webinar? Keep reading for tips from Estill on avoiding audits, saving money, and keeping your books in order.
1. Poor Recording Keeping
Estill reminded business owners to keep receipts and cancelled checks for at least four years and keep tax returns forever. You never know when an audit will occur, and good record keeping will make an audit as painless as possible.
For more tips on record keeping, NFIB members can download a copy of NFIB’s Guide to Document Retention.
2. Not Understanding What is Tax Deductible
Small businesses frequently miss common deductions, according to Estill. These include the home office deduction, meals and entertainment, travel expenses, automobile expenses, salaries and retirement plans.
[Related: The Home Office Deduction – What's Allowable and What's Not]
3. Failing to Properly Account for Payroll Taxes
All taxes withheld, along with the employer’s portion, must be deposited with the IRS every month electronically. Estill recommends that small businesses utilize a payroll service to understand and ensure compliance with all legal obligations.
[Related: 5 Essential Payroll Processing Tips for Avoiding Significant Fines and Penalties]
4. Failing to Consider Choice of Business Entity
In picking an entity, you want to consider tax planning, asset protection, estate planning, and business planning. Meet with a tax professional to get it right, because changing from one entity to another can be expensive.
5. Failing to Use Professionals
"Pay today to avoid costly mistakes tomorrow," Estill’s advised. Professionals that can help save money in the long run include tax professionals, legal advisors, marketing firms, insurance agents, and financial planners.
Find out more: Does Your Business Need a CPA? How to Tell and What to Look For
6. Not keeping Current on Tax Laws
Tax laws change every day, warned Estill. Consult a professional to make sure you are up to speed on current obligations.
7. Failing to Use Retirement Plans
Retirement plans offer excellent returns on investment, both in terms of deductions and retirement savings.
[Related: Retirement Plans 101]
8. Failing to Plan
In picking an entity, consider how long you plan to keep your business and what your vision is for the future.
9. Classifying Workers Incorrectly Employee versus Independent Contractor
Estill warned that the IRS scrutinizes independent contractors closely and that the more “control” you exercise over a worker, the more likely the worker is to be an employee. Check with a tax professional to avoid misclassification issues.
10. Failing to Pay “Reasonable Salary”
If you pay a reasonable salary, it’s deductible. So make sure the salaries you pay are similar to those paid to other employees in the same geographic area.
For more detailed information watch the webinar today and download a copy of Estill’s slides.