With just weeks to go, small business owners are feeling the tax crunch. BusinessNewsDaily checked in with tax experts about the outstanding chores that need to be done by the end of February to satisfy Uncle Sam.
1. Call in reinforcements: Now is the time to determine if you need an accountant to help you get organized or whether you'll be braving this year's taxes yourself using a tax software package. "Be realistic about your knowledge of accounting and how much time it should take to complete your taxes when making this decision," said Kirk Simpson, president and chief executive officer of Wave Accounting.
If you plan to use the same accountant as you have in the past, check in with him or her to see if they can file your return on time or will need to file an extension.
2. Know when your taxes are due. April 17 is the tax deadline everyone is stressing about this year, but if you have an S-Corp or C-Corp, you need to file your return by March 15, or you need to file an extension. S-Corps should file form 1120S by March 15 and provide each stockholder with a K-1 by that date. "I don't know how many times I have seen S-Corp and C-Corp business owners think they have until April 15," said Scott Berger, tax principal at Kaufman, Rossin & Co. If you're an LLC, you have until April 17.
3. Track down missing transactions. If you were following January's tax tips, you've already reconciled your bank accounts with other statements. "Now, it's time to dig through any emailed invoices, cash receipts or PayPal records to make sure there aren't any transactions you haven't accounted for yet," Simpson said.
4. File 1099s and W-2s with the IRS. The forms that you mailed to employees and contractors by the end of January now have to be sent to the IRS by the end of February. It is also a good time to make sure that the appropriate independent contractor and employment agreements are in place, said Charley Moore, founder and chairman of Rocket Lawyer, an online legal service. "Think about the role you want your workers to fulfill and make sure to put it in writing with an Independent Contractor Agreement or an Employment Agreement," he said. "Then, stick with it, from paying payroll taxes, if applicable, through to the tax credits you claim. There can be long-term tax consequences of worker classification from the outset, and so an attorney's advice can be extremely helpful for getting the tax savings you deserve while staying in the good grace of the IRS."
5. Survey your surroundings. If you work at home all or a portion of the time, you can deduct your home office expenses. Calculate the square footage of your at home work space, as well as the square footage of your home as well as how often this space is used for work purposes. "Don't forget to gather all of your utilities, insurance and mortgage or rent receipts," Wave Accounting’s Simpson said. "This is all information your accountant will need when calculating your taxes."
6. Check your 1099-Ks for accuracy. If you are a merchant, you should have received a 1099-K. Sites such as Amazon and eBay as well as PayPal, banks and credit card processors are now required to report credit card, debit card and gift card payments, among others, made to merchants for goods and services for more than $20,000 and more than 200 transactions. It is a new form, and there are likely to be mistakes, said Steven Aldrich, CEO of Outright.com, an online accounting software provider. "Also, make sure that the total takes into account any refunds, exchanges or returns that have been processed," Aldrich said.
7. Consider going digital. "If you digitize all of your records and put them in the cloud, it will be easy to provide your accountant with access to all of the records they need to complete your taxes and they will be available for the future if needed," Rocket Lawyer's Moore said. Just be sure to keep them organized as you would paper documents. "Besides supporting your tax filings and protecting your business from legal liability, good records can help you identify deductions and provide other important insights."
8. Monitor the payroll tax holiday discussions. "The payroll tax holiday is supposed to end by Feb. 29, but the thinking is that it will be extended," said John W. Roth, senior federal tax analyst with CCH, a provider of tax, accounting and audit information, software and services. "If things change, make sure that you make the necessary adjustments to your payroll systems or, if you are using a payroll processor, make sure they are updated."
9. Check it twice: Every year, the IRS publishes a list of the most common tax filing mistakes, and every year forgetting to write in your SIN number at the top of the form tops the list, Simpson said.