MADISON, Wis. (February 21, 2012)
For small business owners, even thinking about tax season may bring up feelings of anxiety. However, small businesses have many tax options and deductions available to them — and the sooner planning for taxes start, the better off entrepreneurs will be. BizFilings, a leader in online incorporation and a supporter of small businesses, offers these five tips for maximizing your deductions and making filing taxes more of a cakewalk than a headache:
1. Get organized! In the hectic life as a small business owner, taxes can seem foreign and daunting. Take steps now to get ahead, organizing your receipts, records and tax documents. Be sure to save all information you receive in the mail — such as 1099 forms, W-2s and other documents of interest. Organization can be key when asking a tax professional to help file your tax return, as he or she will be better able to define relevant deductions.
Getting home office deductions organized is also important around this time of year. Home office space that’s used strictly for business (no personal use allowed) can allow entrepreneurs to deduct rent, utilities, improvements to the home, and more for this designated area — but there are strict requirements. It’s important to know the exact square footage of the space used as a home office, as well as the total square footage of a home. A tax official can help determine the tax deductible amount of expenses based on these facts. For more information on what can and can’t be deducted, use the Home Office Deduction Tool.
2. Make sure you’re filling out the right forms. Filing taxes isn’t a one-size-fits-all opportunity. Different business formations, accordingly, will file tax documents unique to their entity type. For example, a 1040 individual income tax return must be filed by an LLC, a C corporation or an S corporation but each of those business entity types require additional distinct forms to be filed. . BizFilings has created a business type tax comparison chart to detail which forms are required for which formations, as well as the different benefits and considerations that each business formation provides.
“It’s true that there are many different tax advantages to different business structures,” says Karen Kobelski, vice president, small business sales, service & digital marketing of BizFilings. “What’s important for entrepreneurs is to form the business entity that will serve them best — both at tax time and beyond.”
3. Stay on top of the tax updates that impact your business. This year, the IRS is introducing the 1099K, a form that documents the gross amounts businesses paid by credit card, electronic transfer or via online merchants like PayPal. These forms will be sent in the mail to appropriate businesses, but entrepreneurs who don’t receive the form may want to check with the IRS and determine if the 1099K is needed. For more updates and changes, entrepreneurs can visit the IRS’ website.
4. Increase contributions when possible. Though the calendar says 2012, there are still actions that can be taken to impact 2011’s taxes. Small business owners who haven’t already done so can still consider contributing to an IRA (either traditional or Roth). Contributing to a traditional IRA can lower your taxes, and the contribution in the retirement account will compound tax-free. The maximum IRA contribution for 2011 is $5,000.
5. Use a professional to make sure you receive all the benefits and deductions that you deserve. Above and beyond these tips, there are often deductions that are easily overlooked — like business gifts, office supplies, parking, postage, and even taxi fares. To learn more about maximizing your tax deductions, visit the BizFilings small business resources learning center. The Learning Center has information about deductions and credits, as well as tax benefits exclusive to corporations. It also may be best to consult an accountant who is familiar with small business taxes and can help you get the most out of your tax return.
BizFilings is a full-service, online incorporation service provider, offering small business owners a fast, easy, and economical way to form a corporation, limited liability company(LLC), or other business structure online or by phone. BizFilings also offers a full range of business filing and compliance products, including nationwide Registered Agent Service, helping keep businesses in compliance with state regulations. BizFilings can be found online at http://www.BizFilings.com. BizFilings is a part of Wolters Kluwer Corporate Legal Services, a business of Wolters Kluwer, a market-leading global information services company with 2010 annual revenues (of €3.6billion ($4.7 billion) and employing approximately 19,300 people worldwide. Visit http://www.wolterskluwer.com.