Free Small Business Tax Return Help For Small Business Owners

business tax return

In order to ensure the accuracy of your small business tax return, it is important that small businesses learn how to catalog and report their business expenses. For most small businesses (especially those that do not have a full-time accountant on hand to manage their finances), efficiency is also important when managing and recording expenses.

Here are some tips to help you efficiently manage your business expenses so that you have an easier time reporting your expenses when tax season times around.

Develop a system to cataloging information

When it comes time to managing your records and preparing for a business tax return, having an efficient cataloging system can go a long way in helping you stay organized and, ultimately, efficient. Many small business owners can effectively keep track of their expenses, income, and cash flow using a basic Microsoft Excel spreadsheet. The benefit of using an Excel spreadsheet for managing financial records is that you can customize the spreadsheet to suit any possible need or preference you have. However, in order to be most effective with your spreadsheet design and use, you may want to take a course in Excel to ensure that you know how to use the software optimally.

While this is free tax help, not everything out there will be free. QuickBooks is one of the most popular financial software applications – especially among small business owners but will cost you a bit of money. QuickBooks also links to many banks, making it easier for you to capture and record your banking and credit card information with just a touch of a button. QuickBooks can also be used to easily manage invoices, payments, customers, and other common financial tools that many small business owners use on a regular basis.

Old-fashioned ledgers are still effective methods of capturing information and cataloging expenses. Unlike computer software applications, the ledger system does not provide the flexibility you may want when it comes to moving information around or adjusting your records. Therefore, you may have to be comfortable performing manual calculations and staying organized with your results when you use a ledger system.

Know your business tax return categories

When you file your business tax return, you will be required to state the amount of your expenses based on categories. For example, your office-related expenses will not be recorded in the same place as your professional fees, travel expenses, and others. Therefore, if you have never seen a business tax return form before, you may want to take a look at one so that you can get a better idea of what expense categories you may want to create in your cataloging system.

Common categories used by small businesses include:

Office expenses – these include office supplies, furniture for your office, and any equipment you may buy or rent

Building expenses – these include rent, facility fees, utilities, and anything else you may pay for that is directly related to the building structure itself. If you have a home office, you’ll deduct a portion of your mortgage and overall home expenses that is relative to the percentage your home office occupies in your home.

Repairs and maintenance – these are different than building expenses. Repairs and maintenance items may include installing a new light fixture, or items that you’ve purchased to maintain your office space.

Commissions and wages – if you have employees that you pay, be sure to keep track of all payments made to them.

Benefits – benefits are different than commissions and wages. Benefits include employee plans, retirement plans, and any pensions you may have set aside.

Professional development – this is where you keep track of any continuing education efforts, including conferences and classes related to your business.

It’s important that you speak with your accountant for more information about categories that may specifically relate to your business. Just about every small business should use an accountant to ensure that taxes are filed properly.

Keep records however possible

In addition to the record-keeping system you develop either on your computer or in a ledger, it is important to keep all receipts and paperwork related to those records. These receipts and paperwork will not only augment the quality of your record-keeping to help you remember what your payments were for, but they will also be requested by an auditor in the event that your business is ever audited.

Keep paper copies of all of your invoices, receipts, bank deposit slips, cash register receipts, credit card charge clips, and anything else. It may also be helpful to you if you take notes on your records. For example, if you take a client out to a meal, that meal becomes tax-deductible. You may want to include a note on the receipt for the meal in order to jog your memory when it comes time for you to tally your receipts and expenses.

Small business owners need to be sure that their records are not only complete, but that they are as accurate as possible. Not only is accuracy important for your own finances, but if you are ever audited, you may be penalized if you cannot prove that an expense was for a business-related purpose. Therefore, it is wise to take the time now to develop your record-keeping system and habits so that you can be prepared for an easier tax season.

Good luck and we hope you found some value from this free tax help!

Understanding Capital Gains

It’s the end of the year and a new one’s just begun. We’re all interested in seeing the hope and opportunity for the year to come; we all want to make the most of the time we have. We need to be happy, we need to be healthy, and we need to make money. But what about last year; what about what was? We hear all manner of financial folks and talking heads yammering on and on about capital gains taxes, how to shelter tax deferred income, appreciation, deprecation, and so on. “That’s not anything I need to know about; I’m not one of those hot-shot Wall Street guys. I only have some mutual funds.” But what are capital gains? Who has to worry about capital gains? How can capital gains affect your situation? Where should you go to lean more? All interesting questions; with answers that may surprise you.

First of all we should be sure we’re talking about the same thing. From Investorpedia.com a “capital gain” is described as “an increase in value of a capital asset that gives it a higher worth than the purchase price.” What is a capital asset? All sorts of things: real estate, stocks, stamps, fine art, rare rugs, antiques, coins, precious metals, and other items you may have if you’re doing business out of your home; computers, desks, chairs, and copiers are just a few of the myriad of items which can be considered capital assets. While most of your business merchandise will depreciate in value, with other things that’s not always the case. If you snapped a Polaroid with Michael Jackson and got him to sign it in 2009, for example, that may be worth considerably more posthumously.

Capital gains are not realized until the asset is sold. If you have that Polaroid and you keep it until the signature has faded, the image has worn away, and you wait until a point in the future when the commodity is no longer particularly valuable, you will have waited too long. Just like stocks, the value of your asset is only relative to your capital gains until the time that it’s sold. It’s impossible to know if you’ve sold at the high point without the benefit of hindsight, so don’t break your neck about it.

Capital gains exist with stocks and mutual funds. If you are a mutual fund investor you should be aware of when your mutual fund distributes “capital gains.” When you’re investing in a mutual fund, you’re investing in a bundle of stocks and commodities. Depending on the type of fund you’re invested in, this will determine the mix of your fund. Typically towards the end of the year a mutual fund will sell off some profitable investments which will potentially drive down the share price of the mutual fund, but will also afford investors “capital gains.” These gains can be found on Form 1099-DIV; investors in mutual funds should be aware of this as capital gains are taxed at long term capital gains tax rates regardless of how long you’ve personally held shares of the fund.

Capital gains can become something of a nuisance for the inexperienced investor (granted, capital gains are preferable to capital losses) so if your situation is unclear it’s a good idea and well worth your time to sit down and talk with a tax professional. Getting hip to your capital gains situation can help you from having to pay the piper well on down the road.

5 Tax Breaks You Should Review

For every taxpayer the ultimate goal is to give the Internal Revenue as little as possible, while not raising any “red flags” that could cause an audit, which is time consuming and stressful. In order to make sure you save tax dollars you must take every tax deduction possible, every credit available and as many other adjustment to income you can find.

Doing this will help with your personal financial management as you will save paying the IRS and can use the additional monies to invest in the stock market, in bonds or even in certificates of deposit at your local bank.

These are five tax breaks that could help when its time next spring to fill out the tax return and send it to the IRS. Some of them might be just for those who itemize, while others can be used by any filer. Often times these tend to be overlooked, but when applied will help save you money.

  • Additional Gifts for Charity

Everyone remembers adding up the different donations given during the course of the year to charities, but expenses that are incurred in the process of doing work for a charitable organization often are not taken into consideration on an individual’s tax return.

The value of your time is not deductible but supplies purchased for the group is. Similarly if a uniform is required during your charitable work the costs of obtaining that and any related cleaning bills could be added in to the charitable donations. If a vehicle is used delivering, for example meals to the poor, then mileage can be deducted at 14 cents per mile.

  • Moving expenses can be written off and most are aware of that, when relocating for a new job, but for someone’s first job the costs can also be written off. A college graduated hired after graduation is able to write off moving costs if they must relocate.
  • Costs for looking for work anywhere in the U.S. can be deducted. Fees for resumes and outplacement agency fees can be deducted if you itemize your return. The only downside is the costs along with other miscellaneous expenses that are itemized must exceed 2% of gross income before they can be used for tax savings.
  • Travel expenses for those who are Military Reservists and in the National Guard are deductible when you travel over 100 miles and remain overnight to complete training. Included in those are lodging and 50% of meal costs. You can also deduct 55.5 cents a mile as well as parking fees or any tolls. This can be taken with or without itemizing.
  • Childcare credits are used by millions nationwide, but some tend to overlook their right to claim a credit for the costs of childcare during summer months. Included in that is cost of summer day camps and only day camps, overnight camps are excluded.

US Tax Filing Prep Tips

Every year, I make my ‘tax document checklist.’  It’s crude but effective.

I take out a blank sheet of paper, write ‘Tax stuff’ at the top, then write down all the documents I expect to come my way that I’ll need to file and hope I don’t leave something out.

I should probably have a better system, so this is my effort to improve.  Below I’ve listed the things that are typically on my tax document list.  Yours may be longer or shorter.

Income

I break the list down into two, not very original sublists.  Income’s the first one.  (Bonus points if you can guess the second.)

  • W-2s – Think hard about any second job’s you’ve had during the year.  If you’ve changed primary employment, you’ll be getting a couple as well.
  • Bank interest 1099-INTs – This one can be tough if you have accounts all over the place trying to ‘optimize’ your banking.  Me, I just do everything at USAA.
  • Stock dividend 1099-DIVs.  Whether through a mutual fund, or by owning individual stocks.  You get one from each fund company or brokerage house.  What a pain.
  • 1099G for state/local income tax refund
  • Miscellaneous income – Again, tricky.  It’s easy to forget some of these.  Just a few: prizes, scholarships, jury duty pay, unemployment benefits.

Expenses

  • Mortgage interest statement
  • Real estate tax statement
  • Student loan interest paid
  • Gifts to charity
  • Education expenses (post-secondary education)
  • Child care expenses
  • Miscellaneous expenses – Could include moving expenses, expenses related to looking for employment, volunteer work, tax prep, home office (if you’re taking that deduction)

I’ve left off stuff from this list because it’s my list.  But since I’m a regular kind of guy, I think it suffices for many people.  Besides, if you’re claiming farm income or trust income, you probably aren’t doing your own taxes anyway.  That said, if there are any glaring omissions, please leave a comment and let me know.