With the April 15 tax filing deadline looming, now is the time for business owners to get a jump on tax preparation and begin organizing receipts from 2009. Whether you are an independent contractor or a growing small business, giving yourself ample time to prepare your tax return can help curtail errors and provide you more time to properly identify deductible items that may be overlooked if you're rushed.
First, it is important to have a central repository for your records such as expense receipts, bank statements, and other important documents. Start by making sure everything is accurate and up-to-date, and that your records and documentation are clearly organized.
It is also critical to be clear on which items are deductible for your business. If you are the owner of a for-profit business, expenses considered "ordinary and necessary" to your trade or business may be deductible. These expenses may include items such as rent, salaries, interest on a loan for business activities, and certain taxes directly applicable to your business.
Once you've gathered your records, the following tips to help you prepare for tax season:
- Determine who will prepare your taxes. If you don't plan to prepare your own tax return and you haven't initiated your search for a tax professional, now is the time to start. Consider referrals from trusted friends and business associates or look for an accredited tax preparer who is either a certified public accountant, enrolled agent (a federally licensed tax specialist), or a tax attorney. Don't be afraid to ask the tax preparer how long he or she has been practicing, the cost for tax preparation services and professional references.
- Decipher between business and personal expenses. If you incur an expense for something that is used partly for business and partly for personal purposes, you may be able to deduct the business portion. Remember to carefully file accurate supporting documentation for any business expenses you report.
- Consider e-filing. Business owners who file electronically may receive a tax refund sooner than those who file a paper return.
- Utilize government resources for tips. Consider reviewing the Internal Review Service's (IRS) Web site at www.irs.gov and your state's taxing authority websites . Many sites offer small business assistance sections and list deadlines and other helpful tax and business information.
Getting a head start on your taxes will give you more time to find the best tax preparer to suit your needs without having to scramble at the last moment. When it comes to taxes, it's best to take your time and make sure you are filing correctly and claiming the proper deductions.
The foregoing article is intended to provide general information about tax preparation and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor.