The April 15th tax filing deadline is around the corner, but small
business owners and self-employed workers still have some time to read
up on last minute tax tips and learn about the most forgotten deductions
for the self-employed community.
Today, TNJ.com spoke to Keith Hall, president and CEO of the National Association for the Self-Employed (NASE), to bring you advice on filing for your micro-business.
TNJ.com: What are some of the taxation errors small business owners and self-employed workers seem to make due to a lack of knowledge on the subject?
Keith Hall: The mistake that I hate to see is forgetting about valid deductions. That usually happens when business owners wait until the deadline and forget about the business’s use of an automobile, the deduction for a home office and, most universal, the available deductions for retirement plan contributions. These deductions are easy to forget.
TNJ.com: Are there a lot of differences in the way taxes are filed for full-time workers versus small business owners and self-employed workers?
K.H.: The biggest difference is that small business owners and self-employed workers have to attach additional forms. All of the income and expenses related to the small business are included on a Schedule C form, which represents profits or losses from the business. Depending on the complexity of the business’s expenses, other forms would also be included. It’s almost like having a second tax return.
TNJ.com: Is it advisable that small business owners and self-employed workers have an accountant file for them versus the do-it-yourself method?
K.H.: It’s always good to use a professional, but with technology today and organizations like the NASE and the IRS, the tools and the information you need are readily available online.
Below is NASE’s “7 in 7” list, released today. It’s a list of 7 top tips to filing beneficial and accurate tax returns in the next 7 days.
7. Don’t Take the Easy Route. Whether you will do the return yourself or hire a professional to help, make sure you avoid the temptation to take the easy route. Don’t just guess on business miles, or travel expenses. Take the time to check your records, update your mileage log, do your due diligence. If a question ever comes up it won’t be tomorrow but several years from now and you won’t remember where you got that number. So avoid short cuts, do your homework in gathering your little stack of paper and you will be glad you did.
6. Stay Connected. As a small business owner, it is easy to feel like you are out there all alone. If you have an Internet connection, you have resources. Bookmark relevant websites, such as the IRS and SBA sites. Take some time to ask questions, search the site and review potential deductions that you may have missed. Stay connected and remember that you are NOT alone.
5. Look for Hidden Deductions. Most deductions come straight from your business checkbook. But some items like the business use of your personal vehicle, the business use of a space in your home as a home office are easily forgotten because they don’t show up as a cash disbursement. In addition, many small business owners forget about the options for a deductible retirement plan contribution. Make sure you don’t miss these deductions in calculating the net income from your small business.
4. “Red Flag”, Red Herring. Make sure that you are extremely diligent in taking advantage of every single legitimate deduction to which you are entitled. Do not avoid a deduction because you “heard” it was a red flag. Foregoing a deductible item that you are entitled to is like paying the IRS part of your hard earned money in exchange for reducing your chances of audit from about .0087 to .0086. Do your homework, document your deductions and DO NOT give the IRS any more money than you absolutely have to.
3. Don’t Forget About the Affordable Care Act (ACA). Under the ACA all of us must have a qualified health plan or we must pay an extra tax on our 2014 tax return. Make sure you check the right boxes based on the choices you made during 2014 for health coverage. This is new this year, so make sure you don’t forget.
2. Build a Paper Fort. Yes, we are supposed to be heading to a paperless society, but at tax time you still want to have a stack of paper. Take some time to build your own little paper fort. You should have received 1099s, W-2s, 1098s, K-1s, 1099INTs, 1099DIVs, etc. Now is the time to find all of that paper and organize, summarize, and secure it. If a question ever comes up and the IRS wants to know, most questions can be answered with a single piece of paper.
1. Out of Time? File an Extension! It’s April 15th and the return is due. Still not done? You can certainly ask for more time. Request and extension using IRS form 4868 for an extra six months to complete all the forms. Remember that this is an extension of time to file NOT an extension of time to PAY. So make a quick estimate of any amount that you might owe and send a check with the extension.