Small Business Tax Tips for 2013 and Beyond
The numbers for tax year 2012 may be fully baked, but there’s plenty of time to work 2013’s number to your advantage. A group of tax and finance experts offer up a baker's dozen worth of tax tips and tricks to lighten the load in years to come.
The good folks at SurePayroll, an online service that helps small business owners handle a wide range of payroll chores, offer up several tips for entrepreneurs to keep in mind.
2. Also, as you work with vendors or outside contractors, anticipate the ones you will pay more than $600 over the course of the year so you can issue 1099-Misc forms at the end of the year. Oh, and be sure to have complete, correct names and Social Security numbers for those vendors and for your employees’ W-2 forms. On W-2s, the IRS may impose a penalty for each form without this information.
3. Finally, verify the proper withholding for taxable fringe benefits. A small business owner can consider offering employees fringe benefits such as health, vision and child-care assistance instead of standard raises to reduce tax burdens.
Consult IRS Publication 15 to find out what pre-tax fringe benefits are available and consider applying any or all of them to your company. Check out SurePayroll’s Small Business Resources site for free business calculators, guides to payroll and employment laws by state, and a payroll glossary.
More small business tax advice comes from Outright, an online small business bookkeeping service.
4. The company’s experts urge small business owners to check the accuracy of all forms you receive. Since the IRS receives the same forms, changing the numbers on your return is a red flag.
For example, online sellers receive a 1099-K form with their revenues from specific payment processors—and the IRS uses this form when it decides whom to audit. However, the form does not differentiate between business and non-businesses transactions, so if a seller uploaded money into his own PayPal account, it would show up in the 1099-K as if it were revenue from a customer.
5. When faced with a choice of deducting either your actual auto expenses (backed up by receipts of course, which we all diligently track) or the mileage deduction for business-related driving, take a mileage deduction. At 55.5 cents a mile for 2012 (and a penny more in 2013), the mileage deduction is a better deal. Conveniently, mobile apps such as Outright make it easy to log your mileage as you go.
6. Also, if you have unsold or unused inventory, instead of spending money on storing it, donate it and get the tax deductions. (Just keep in mind that goods donations greater than $500 have more rigorous reporting rules.)
7. Do you like your kids and spouse? If so, you can hire them and save on next year’s taxes. For instance, if you pay a minor child up to approximately $6,000 from your business profits for helping you with tasks (no, mowing the lawn doesn’t count -- unless you have a landscaping business), that amount is not taxed the same as your ordinary income. Also, if you hire your spouse, then as his or her employer you can pay for the healthcare of their family -- i.e. yours -- and those payments are also tax deductible.
The CPAs at Xero, an online accounting platform that also enables online collaboration between accounting professionals and their clients, also offer salient advice.
8. Jody Padar, CEO and principal of the Chicago-area New Vision CPA Group and a partner with Xero, advises her clients to take advantage of today’s mobile cloud-storage technologies to keep track of your expenses. Many online accounting solutions (Xero included) feature mobile receipt upload: Take a picture of the paper with the camera on your iOS or Android device, and you can bid adieu to the crumpled receipt.
9. Padar also notes that Section 179 of Small Business Expensing allows SMBs to deduct the full purchase price of qualifying equipment and/or software up to $500,000.
This is a 2013 tax extension carried over from 2012, but it was on the chopping block and there’s no guarantee it will survive into 2014. Translation: make those needed upgrades that qualify this year.
Greg Jones, CEO of BookKeeping Express, the first U.S. franchise focused solely on bookkeeping services, also offered some tips on how to save small business owners money, time and pain at future tax time.
10. In addition to maintaining a complete and accurate set of books as well as adequate documentation to back up claimed expenses, Jones urges clients to keep business and personal expenses separate. That means maintaining separate a checking account and credit card account for your business.
11. He also pointed out that new businesses have special advantages, most notably that the costs of launching a business are considered capital expenses, and you can deduct up to $5,000 your first year in business.
12. There’s also business-related education: You can deduct educational expenses that maintain or improve skills required in your present employment, including seminars, classes, and convention fees (and it’s a bonus if said convention takes place in a warm, sunny locale).
13. Finally, Jones points to the hidden gems in the provisions of the Small Business Jobs Act Tax, signed into law in 2010. The law has nearly 20 initiatives aimed at decreasing the tax burden and providing savings for small businesses.
Jamie Bsales is an award-winning technology writer and editor with more than 20 years of experience covering the latest hardware, software and Internet products and services.
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