Tax season is underway, and if you’re like most small business owners, you’re probably gathering all your important paperwork and double-checking your records to prepare for all the tax deadlines. Just as you’re looking back on the past year and its expenses and records, the new year is a great opportunity for small business owners to look forward. Look forward and find ways to strengthen and improve your business — whether it’s lessening your risk of an audit or maximizing your tax deductions. Here are some tax tips that’ll help your business in the new year.
More and more experts are coming out in agreement that those who use a Schedule C to file their taxes (usually Sole Proprietors) are more likely to be subject to scrutiny and perhaps an audit from the IRS. Why is that? Well, since a Sole Proprietorship isn’t a formal business, doing business as an unincorporated business tends to raise red flags compared to an incorporated business. With little regulation and very little compliance rules, it seems that the IRS wants to be sure that those business that aren’t incorporated are still following the law.
Keep every receipt
It sounds simple but it’s an ongoing project that you should practice year round. Gather all the loose receipts lying in your office and log them into your accounting system. They can all add up to a lot of deductions — you never know! Making a habit of keeping all your receipts and maintaining a record-keeping system is a great method to plan for the next tax year ahead so you’re not frantically logging in records at the last minute. Plus, keeping organized throughout the year means that you’ll be less susceptible to errors later on since planning ahead affords you time to double check your work.
Set up a business retirement plan
When you set up a business retirement plan, every dollar that you contribute is tax deductible. Not only is it tax deductible, but that money you put in your plan is an investment in your future. The earlier (and longer) you keep your money in your retirement plans, the more money your plan may be able to accrue. It’s a win-win.
And as of 2015, small business owners are allowed to contribute $53,000 to their own business retirement plan. There are different kinds of plans (e.g., 401K, SEP-IRAs), and you can combine them to maximize your contributions up to $53,000.
Do you have any tax tips for the new year? Share in the comments below!