Home-based businesses that wait until the last minute to get their taxes ready could be costing themselves in the long run.
Meisa Bonelli, managing partner of Millennial Tax, a provider of tax preparation and business planning to home-based business owners and solopreneurs, said those who aren't strategically thinking about their taxes year-round could be missing out on potential savings when it comes time to pay Uncle Sam.
"Sadly, many small and home-based business owners, solopreneurs and startup owners are serial 'late filers' and miss out on maximizing tax benefits that are unique to their type of business structure," Bonelli said.
With this in mind, she offers seven tax-saving strategies solopreneurs, startups and home-based business owners should be mindful of.
Choose the right entity for your business: Per the Global Entrepreneur Monitor Report, 69 percent of all startups in the United States are home-based businesses and 59 percent of established businesses more than three and a half years old continue to operate as home-based businesses. If you've decided to start a business, or maybe you have been running one for a while, then become official. Let your county, state and the federal government know by registering your business within your state under the entity type that best suits your business goals. Remember, there isn't a one-size-fits-all for home-based businesses, so make sure to consult with your tax professional or an attorney about the best business entity for you.
Audit proof your business: Audit proofing your business means more than just saving your receipts. Depending on the type of home-based business you operate, you may need to keep calendars, mileage and personal use logs. All home-based businesses aren't created equal, so speak with your tax professional about what you can do to make your business tax-compliant.
Get a home based-business tax professional: If you would go to an optometrist for your eyes and a podiatrist for your feet, why wouldn't you seek out a tax professional that understands the intricacies of your type of business? Choosing a specialized tax professional can save you thousands of dollars (in missed deductions) and time (trying to learn pertinent IRS regulations). Do-it-yourself software can't do it all and software is only as good as the person using it.
Get a second look: In 2012 (for the 2011 filing year), nearly a quarter of a million individual business returns not claiming the Earned Income Tax Credit (excluding farm returns) were examined by the IRS and assessed additional taxes to pay after review. Many tax professionals offer complimentary consultations regarding their services and will take a look at your prior year's returns. If the IRS is going to make sure they don't miss a dime, then you should make sure you don't miss a deduction.
Tax planning is year-round: If your business isn't seasonal, then you need a year round tax plan, strategy and procedures not to mention a professional that's available. When you have a simple tax situation, it is OK to check on your taxes once a year if not much has changed in a year (e.g., purchasing a home). However, if you're running a business, the tax implications of your business' decisions are a 365-day consideration.
Start a retirement plan: The government makes it very advantageous for home-based business owners and solopreneurs to save for retirement. Even if you're just starting out, planning for your future is one of the best savings strategies. Take full advantage of the plan that best suits you and your long-term goals.
Have integrity: It's not a deduction you'll find in an IRS publication, but running your business on the up-and-up is good for your bottom-line. Tax fines and penalties for not running your home-based business like a real business are stiff. Seek out the information you need to operate a successful home-based business and consistently follow the appropriate rules and regulations.
Originally published on Business News Daily.