We have asked one of our members for tax tips until tax day and hopefully these tips will be helpful to all of our members. Thank you to Brian R. Schobel, CPA, https://www.bookkeepingbrian.com/
Review of Financial Statements
Do a final review of your financial statements at year-end. The process may uncover errors. This will allow for correction before presenting these statements to your tax accountant. An accounting system such as QuickBooks will also help maintain current and accurate accounting records. Keeping documents in the cloud will reduce aggravation and costs to prepare your taxes. CPAs are particularly useful resources helping clients with personal and business tax advice. Plan your financial strategies for 2021 tax savings now and make sure to review at year-end!
Stay organized!
When it comes to filing your business taxes, you need a system! Collecting paper bills, invoices, and receipts stored in a shoe box till the end of the year is no longer an acceptable practice. Technology makes recording transactions and maintaining supporting documentation a lot easier, but you must put a system in place. Many software applications allow you to save images, documents, and other files to the cloud. Accounting applications such as QuickBooks online allow business owners to automate much of the accounting process. However, it is important to consult a tax expert like a CPA when implementing any accounting system. You want to make certain your accounting transactions are recorded correctly for tax purposes. Keeping your paperwork organized will simplify your year-end tax filing.
Prior to paying any of your vendors in a given year, you should ask them to complete a W9 form. This will aid in assessing the need to send your supplier a 1099 at year end. The W9 includes important information necessary for completing a 1099 such as the EIN. The entities EIN or employer identification number is a crucial component when filing the 1099 with the IRS. So, let each vendor know, before they get paid. They will need to complete a W9 form.
Thursday Tax Tip from Brian R. Schobel, CPA
One of the best ways for businesses to reduce tax liability is to invest in employees. Compensation needs to adhere to IRS guidelines. Employees are paid a reasonable amount, ordinary and necessary, for services provided, and paid for or incurred in the current year.
Hiring skilled employees while providing benefits will also aid in retention of good workers. By adding a company health care plan, a profit-sharing plan, 401k employer match, & health savings accounts, employers can attract quality talent while reducing their overall tax burden. In addition, hiring certain employees could provide both federal and state tax credits.
Employees help you grow your business! Invest wisely!
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Thursday Tax Tip from Brian R. Schobel, CPA
Travel expenses are tax deductible. They must be ordinary and necessary in traveling away from your home for business purposes. Being away from your “tax home”, as the IRS puts it, for an extended period, normally longer than one day, while conducting business provides for these tax deductions. Travel expenses to conventions are also deductible if you can prove it a benefit to your business or trade. Notable deductible travel expenses include, air, train, bus, car, taxis, shipping baggage, rental car, lodging, business meals, dry cleaning & laundry, communication fees, tips, and many other less common expenses. The IRS also notes good records as being essential when it comes to travel expenses. A bit of a warning to taxpayers, to save those receipts. Again remember, it is important to consult with a tax professional to make certain you are taking full advantage of the internal revenue code.
Thursday Tax Tip from Brian R. Schobel, CPA
Revenue, revenue, revenue! When first starting out in business it is best to keep things simple. Stay focused by selling only your best products or services to your clients. Remove distractions that limit your ability to drive sales. Schedule activities that will promote growing your business. Some activities include joining the local chamber, a networking group, or volunteering for a nonprofit. Meeting new people that can introduce you to others needing your product or service will boost your income. The cost to you is the help you provide their business through word-of-mouth advertising. People helping people is what it’s all about and you’ll increase your revenue as you go!
Individual tax return filings are due Monday May 17, 2021. If you plan on filing an extension you also have until May 17th. Doing so will allow you a few more months to get your documents in order until October 15, 2021. Important to note that an extension does not extend the time to pay if you owe tax for 2020. If you believe you owe more than a thousand dollars for 2020, pay the IRS on or before May 17th. If you do not, you may end up with an underpayment penalty, late fees, and interest.
You have four days left. Give Brian a call if you need help completing your return @ (610) 568-5008. We still have availability to file for you. https://www.bookkeepingbrian.com/
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