Tax season happens every year, but many still tend to overlook changes that affect their tax situation – especially if they are self-employed. Owning a small business or being self-employed is a lot of work, and that’s before it comes to filing taxes. Small-business owners and the self-employed can make tax time easier by following just a few essential tips:
Keep good records, keep them separate and keep them safe
Keeping good records is the foundation for everything else because you can’t deduct what you haven’t documented. First, track all income, save your receipts and remember to document income and expenses. Next, keep separate, business-only bank accounts and credit cards to make it easier to keep good records and file accurate tax returns. Finally, secure paper and digital records in a safe and readily available place and make sure you back them up often.
Deduct eligible expenses
A deductible business expense must be both ordinary and necessary, meaning that it must be common and accepted as well as helpful and appropriate for the trade or business. If you use part of your home exclusively and regularly for business, some mortgage, utility, tax and insurance expenses may be deductible. Also, keep in mind that you can also deduct certain car expenses when you use your car for business purposes – using either the actual expense method or the current standard mileage rate.
New tax requirements and tax forms
It’s important to keep in mind that when you are self-employed, there is no employer to automatically withhold tax from each paycheck. If you owe taxes on income that isn’t subject to withholding, you may need to make quarterly estimated tax payments throughout the year or increase withholding from other sources of income. If you don’t pay enough estimated taxes or have enough withholding during the year, you may be subject to an estimated tax penalty, even if you pay your entire tax liability by April 17.
Remember if your small business has employees, you must pay employment taxes, including unemployment tax and the employer’s portion of Social Security and Medicare taxes. You must also withhold and remit federal income tax and the employee portion of Social Security and Medicare taxes.
Save money on tax preparation services
If you are too busy or aren’t comfortable preparing your business’ taxes, you may want help from a tax professional. The cost of business tax preparation may even be a deductible expense.
This year, H&R Block is offering taxpayers half off when they switch to Block. H&R Block provides a high level of expertise and personalized guidance to ensure that the best decisions are made for your unique situation. By switching, you’re choosing a trusted brand with a low price.
From March 1-25, any new H&R Block clients can pay half the price they paid last year to another tax preparer (subject to $125 minimum charge). To qualify, taxpayers can bring their tax preparation receipts from last year to their local H&R Block office to receive the half-off discount. The offer applies to individual and business, federal and state tax returns for tax year 2017. Learn more about H&R Block half off online or call 1-800-HRBLOCK.
[Teri Furlong is an Office Manager for H&R Block, the world’s largest tax services provider. Teri works out of the H&R Block office located at 9228 South 700 East in Sandy, Utah. She can be reached at 801-561-5153.]