Finding the right information for filing your small business taxes in the Miami area can be a real struggle. The April deadline to file last year’s taxes has passed, but it’s never too early to start preparing for next year. To make things easier for you, we’ve compiled a checklist of helpful actions you can take to get ready. If you need help navigating the jargon or think you might be missing out on some deductions, don’t hesitate to set up a meeting with us at Calas Group.
Without further delay, here is our essential tax planning checklist for your Coral Gables or Miami-area small business.
Get Your Expense and Bookkeeping Documents Together
Keeping records of all your business’s financial dealings is critical to a smooth tax filing process. You need to document properly all the expenses that your small business accrues, and bank statements are not good enough for the IRS. If you make any purchases, keep your receipts (make sure the receipts record the place, date, amount, and purpose of the expense), especially for travel and entertainment expenses (you can deduct 50 percent from entertainment costs), including hotel stays, meals, and other costs that your business incurs. The government tends to scrutinize these types of expenses more closely than other business costs, so having the documentation to back up your bookkeeping records will make sure you don’t get into trouble.
In addition to keeping your receipts in order, maintaining clear, organized books will help expedite the tax filing process. If you’ve been slightly lax about keeping your important financial documents in order, you may need the help of a tax professional to make sure that everything is in the right place.
Understand Your Deductions
Small businesses have an opportunity to take advantage of many tax deductions. If you’re not sure, you can find out whether you qualify for these deductions by reviewing IRS website. The three big ones are for home offices, vehicles, and health insurance.
You can claim a home office deduction in one of two ways. The regular method takes into account the square footage of your home office and the square footage of your entire home. Dividing the area of your office by that of your home gives you the percentage that you can deduct from your mortgage interest or rent payments. The second method offers home office users a way to simplify this calculation. Beginning in 2013, the IRS began offering a flat deductible rate of five dollars per square foot for home offices. To get the largest amount for your deduction, calculate what you would get with each method to see which you should use.
Similar to the home office deduction, the business vehicle deduction can help you save on driving. To calculate what you should deduct, you can either take a standard deduction or deduct the actual expense. If you choose the latter, you have to take meticulous notes on business-related driving. For instance, if you drive 5,000 miles throughout the year and 500 of those miles are for business, you can deduct ten percent of what you spend to operate and own the vehicle but only if you document those miles well.
If you are self-employed, you can deduct the cost of your health insurance premiums and the health insurance premiums of any of your dependents, as well. This deduction should be recorded on line 29 of form 1040 rather than on Schedule C, and if the expenses amount to more than what your business makes, you can deduct these extra costs on Schedule A as itemized medical expenses.
File the Right Tax Forms Correctly for Your Small Business
Not all small businesses use the same forms to file their taxes. Let’s break it down:
- Sole proprietors and single-member LLCs use Schedule C of Form 1040 Individual Tax Return.
- Partnerships and LLCs with more than one member use Form 1065.
- S Corporations use Form 1120-S.
Additionally, LLCs, partnerships, and S Corporations must issue a Schedule K-1 to any shareholders. This form reports the income, deductions, and credits of each shareholder.
Remember to double check that the basic information you provide on each form—name, social security number, and address—matches what the Social Security Administration has on file to avoid delays or rejected returns. You may go through some major life events this year, such as marriage, but if you don’t change your legal name to reflect those changes, stick to your current name. Even if you do change your name before filing, you should check to make sure there are no typos when you file.
Understand Where to Report Your Earned Interest
Any interest earned from a business checking or savings account needs to be reported on your tax return. If you have such an account, your bank should send you a Form 1099-INT. Though it is a business account, any interest you earn from it should be reported like dividend income using Schedule B, rather than Schedule C.
List Any Business Assets Bought and Sold
Loss and gain from any equipment, furniture, or other business related items that you buy or sell this year will need to be recorded on your return. To make calculating losses and gains easier, you should document any purchases your business makes throughout the year. Record the cost, the date you start using the equipment, and, if any, the date and proceeds of the sale.
With this year’s April tax deadline just passing, take a moment to review what you will need to do over the next year. And if you’ve put off filing your small business taxes this year, you can still file an extension. Need help? Visit your local Coral Gables tax professionals at Calas Group Accounting and Financial Services.