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Take on Tax Season With These 5 Tips

Tax season is right around the corner, and it’s time to start preparing to file your return. Here are five tips you can use to reduce the amount of tax you owe and/or make tax time simpler for your company.

1. Organize your records.

As your filing deadline approaches, organize your records so that your tax advisor can prepare your tax return accurately. Records they will need to include bank statements, invoices, merchant statements, inventory records, expense receipts, payroll information and information related to any real estate your business utilizes or owns.

2. Take section 179 deductions.

If you purchased property and began using it for business purposes during 2015, you can include up to $500,000 of this property as a section 179 deduction when you file your taxes – (subject to limitations). However, keep in mind that you cannot include land or investment property in this deduction.

3. Manage your health insurance tax credit carefully.

If your business qualifies for the health care tax credit but you don’t owe any taxes in the current year, consider carrying your credit forward to reduce your tax liability during 2016. Or you could also do a carryback to 2014 to receive a refund.

4. Know the deadlines.

For the 2015 tax year, relevant deadlines for businesses are as follows:

• Fourth quarter estimated tax payments- January 15, 2016
• Deadline to mail W-2 forms to employees – January 31, 2016
• Deadline to mail Form 1099 to recipients- January 31, 2016; to IRS February 29, 2016
• Partnership returns- April 18, 2016
• Extended deadline for partnership returns- September 15, 2016
• Corporation income tax returns- March 15, 2016
• Foreign Bank Account Reports- June 30, 2016

5. Know the difference between an independent contractor and an employee.

According to the Small Business Administration, one of the biggest “red flags” for the IRS is the incorrect classification of employees as independent contractors. Making this mistake may increase your risk of audit, as it is often seen by the Internal Revenue Service as an attempt to avoid paying extra payroll taxes. Prevent problems by classifying the people you pay carefully. There are a number of factors the IRS uses to determine whether an employee should be considered as an employee or contractor. Here are just three examples:

• Control over behavior – Do you control what the individual does and how he or she does it?
• Financial issues – Do you control how the worker is paid, or whether or not expenses are reimbursed?
• Relationship and benefits – Is your relationship with the individual temporary or ongoing? Do you provide employee benefits such as vacation pay?

How much weight the IRS applies to these and other factors may vary with each situation. It is important that you seek classification guidance from a knowledgeable tax advisor/preparer early in the year to preempt any future problems.