2017 Top Tax Preparation Tips for Small Businesses

It is tax season, and small business taxpayers are looking for ways to save money, and maximize deductions and credits. It is the right time for small businesses to decide what they want to achieve next year and how they can minimize tax liabilities. Tax time comes with an urgency and pressure, and small businesses are vulnerable to mistakes.  Paper traits can go awry, tax deductions can go unclaimed and costly surprises can result etc. It is always better for a small business to hire some small business tax preparation service. To get you started, here are few important tips you can take in order to maximize your tax benefits:

Maintain separate accounts for business and personal expenses

Many small businesses merge their business and personal accounts. It can cause a big confusion around tax time, making it difficult to track expenses and incomes. Luckily, you can avoid this problem with a little care up front. If you operate a small business, make sure to maintain separate bank accounts in your business’s name and prepare regular accounting statements for evidence including balance sheet, income statement, cash flow statement etc.

Keep a proper record of business expenses

A good and careful documentation is critical for justifying many deductions from income. Small business common deductions are entertainment, travel, meals, charitable donations, health insurance, start-up expenses etc. It is significant to get all these records in a good shape. Keep a diary to record all the entertainment expenses, including the amount, purpose, date and place. For travel expenses, you should keep a trip log separating personal and business use.

 Avoid tax preparation mistakes

Small businesses do a lot of tax mistakes and it is important to mitigate those mistakes. A big mistake that business owners make is to limit their deduction to mileage. If you can prove that these all are business expenses, you can deduct the cost of oil, insurance, tires, lease payments and parking fees In addition, don’t forget the small expenses. Whether it is magazine subscriptions or education classes, make sure to track all your expenses and consult your tax advisor about what you can or can’t deduct. Moreover, don’t forget about your other tax obligation such as local taxes, payroll, property, self-employment taxes etc. These all can hurt you if you are not compliant in a timely manner.

Avoid becoming a victim to scams

Tax season is the time when small business taxpayers are vulnerable to scams. One of the most common tax scams involves a call, text message or email from an unknown who claims to represent the IRS. But in reality, IRS doesn’t contact taxpayer about such matters. The motive of this scam is to collect money. In addition, it always better to keep all communication secure between tax preparers and their clients. Some scammers may attempt to intercept this communication to steal sensitive information. So if you are sharing some information related to your taxes with any person, make sure that the communications are kept secure from scammers.

5 Interesting Tax Facts You Probably Had No Idea About

April 18 is just 2 weeks away and your unfiled taxes have you in a fear. Whether you file on your own or use tax return preparation services in Concord, you need to know certain important things about tax, such as what is your filing obligation? What is the rate of taxation? Do you have all the important documents needed to file tax? Orhow your choices can affect your bottom line?

You know, this is the time when IRS requires employees to report their salary information on Form W-2.  You want to minimize your tax liability and maximize your tax benefits; you get timely and accurate advice and all deduction possible for your situation when you file with TaxCare.

You may or may not like having to pay taxes, but if your gross income is more than the applicable magic number, you have to pay federal income tax. The following surprising facts highlight what many of us don’t know about tax?

The IRS code is too long and changes a lot

No, it is not 5,000, not even 10,000; the IRS tax code is more than 70,000 pages long. Yes, you read it right. If you are going to file tax for the first time and have a complicated return, you need enough time, energy and patience to get the proper knowledge of tax return. If you find it difficult or have stuck in between, find a professional tax preparer, like TaxCare A professional and experienced tax expert definitely saves you a lot of money.

Second thing is that IRS code changes more than once a day. According to a report, there have been more than 4,500 changes to the tax code since 2001.

The first income tax occurred in 1815

The first income tax occurred in 1815 when an income tax was proposed to pay for the war of 1812 by Secretary of Treasury Alexander Dallas. However, it did not become a law till President Abraham Lincoln hasn’t passed the revenue act of 1861 to fund the costs of civil war. Earlier, the act imposed a flat tax of 3% on those people who had gross income over $8,000. But later in 1862, the act was amended and a new interest rate of 5% was imposed for all incomes over $10,000.

The Average Tax Refund is About The Same For Each State

From income to cost of living, many things vary to a great extent from state to state. But average tax refund doesn’t change much. No matter from which state are you, the national average tax refund i.e. $2,860 stays almost exactly the same across the board.

California has the most millionaires

According to Forbes, United States has 540 billionaires with a combined net worth of $2.399 trillion. Out of these California has the most millionaires. In 2013, more than 40,000 Californians reported over $1 million in income. Even in 2016, California has the highest density of millionaires, with 772,555 millionaire households. Vermont has the least –less than 300 millionaires.

IRS never ask for electronic personal information

You may have seen many scams related to tax. Scammers might call, email or text claiming to be the IRS and you can easily be scammed.  It’s important to know that IRS never requests electronic personal information nor demands immediate payment of taxes owed. If IRS needs some information about you, they will mail you first. If you get a call asking your electronic personal information, call the IRS. With some awareness, you can protect yourself from tax-related identity thefts and scams.

What You Need To Know About Tax Interest and Penalties

With tax day just a few days away, the race is on to get tax return in the mail or electronic file by the due date. Tax interest and penalties for not filing a tax return on time or not paying what you owe the IRS can really hurt you.

If you are due a refund and file a late tax return, there is no penalty. If you owe tax and you are not filing and paying on time, you will most likely owe interest and penalties on the tax you pay late. If you want to keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Whether you are filing the tax on your own or hiring some small business tax preparation services, if you don’t pay attention to deadlines and details, you can multiply the amount of tax due.

It sounds difficult but it’s easy to avoid the situation. No one wants to get stuck in a tough spot with IRS payment. Here’s what you need to know.

Request an extension
You can request for more time to file your tax return but you must submit the proper form. You can request an automatic six-month extension. The best way to get an extension is requesting it electronically. This is the fastest and easiest way to get an extra time to file the taxes. Use the IRS free file to submit form 4868 regardless of your income or you can take help of tax preparation Services Company.

Pay any amount due
Requesting an extension does not mean you get more time to pay any amount due. You must pay any amount due and estimate your tax liability on Form 4868. Electronic payment using IRS direct way is the best method to pay up.

Take care of your time
No matter you are filing your own or some small business tax preparation services is guiding you, you should watch the clock. Payments are still due by the original deadline. You should request an extension or file a tax return even if you are not able to pay the full amount to avoid a costly late-filing penalty.

Two penalties may apply
If you are late to file your tax, you will have to apply two penalties. One penalty is for filing late and one if for paying late. Interest grows on top of the penalties. If you file your 2017 tax return more than 2 months after the due date, the minimum penalty is $205 or, if you owe less than $205, 100% of the unpaid tax. The penalty is generally 0.5% of your unpaid taxes per month and can build up to as much as 25% of your unpaid taxes.

Do your best
If you want to reduce the amount subject to interest and penalty charges, you should pay as much as you can. Currently, the interest rate is 4% per year, compound daily. The late filing penalty is 5% per month and the late payment penalty is 0.5% per month.

Make a plan
You may be eligible to make monthly payments through an instalment agreement with the IRS. If your income is $50,000 or less in combined individual income tax, interest, and penalty, find out more and apply here.

Take the help of professionals
If you find difficult to file your tax return or some important things you are not aware of, it’s always better to consult some tax professionals. Small business tax preparation services can guide you and provide you timely and accurate advice that keeps you in peace while every shifting tax requirements.