Conventional wisdom is that you should have up to 12 months of living expenses put away before you start your own business, although the figure depends on a few factors.More >>
While your thoughts at the end of the year are probably filled with everything from next year's budgets to holiday vacation plans, don't forget that tax season will be upon us before you know it. Leaving everything for a last-minute cram session could disrupt your business in the spring. To avoid a crunch, you should prepare for tax deadlines well in advance.
Look for deductions. Looking for ways to reduce your taxes can be a great help to your business. In general, you can deduct expenses that are both ordinary and necessary. According to the IRS, an ordinary expense is one that is common and accepted in your trade or business, while a necessary expense is one that is helpful and appropriate for your trade or business. Note that an expense does not have to be indispensable to be considered necessary.
One helpful document from the IRS, Publication 535, can help to explain what you can deduct. Some deductions that are worth considering include the following: bad debts, depreciation, employee wages, insurance premiums, interest, employee pension plans and benefits, and rent expenses.
Hire an accountant. One deduction that may be a great investment is finding an accountant to help prepare your taxes. If you've already got an accountant who keeps your books in order, they should be up to date with IRS regulations. If you're hiring an accountant just for this tax season, spend some time on the phone before your first meeting so that you'll have the necessary items prepared. Remember, your accountant should not just do your taxes for this year but also advise you on the things you'll need to do to plan for next year's taxes.
If you're planning on doing taxes yourself, check the IRS Web site for some helpful products, including a tax calendar with important deadlines. In any case, getting on top of your taxes now will make life easier (and less costly) when the deadline arrives.
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