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.
Home Office Expenses
Most new businesses today are home-based. Having a home office allows you to deduct business expenses that normally your household absorbs. Internet access, mobile phone, travel, office supplies & equipment like a new computer are expenses the IRS allows as business deductions.
If you are using a room in your home exclusively to operate and is your principal place of business, you may deduct the cost of this space. You take the cost of the entire home divided by total square footage multiplied by the square footage of the utilized space. Since home offices are exceedingly popular today, the IRS has relaxed rules governing home office deductions.
It's always best to consult a CPA to make certain you have systems in place to capture business expenses accurately. Accounting professionals know the best strategies for saving you money at tax time.