Yes, tax season is technically in April. However, that doesn't mean small business owners should forget about this crucial financial aspect during other months throughout the year.
Aside from the deadline itself, few times are as important as the end of the year for proper tax planning. The goal of any business should be to capitalize on every available deduction and save as much money as possible. Instead of being tax liable for any number of things, some simple calculations – and a discussion with a tax advisor – can make all the difference.
In order to get started, small business owners may want to consider these four money-saving financial tips:
1. Take a look at those subcontractors
There comes a time for any small business when it is prudent to hire additional help. If the company brought in any subcontractors at all, including incorporated attorneys, it will have to file a Form 1099 to the recipient by the end of January 2014, according to Entrepreneur magazine. This is only relevant if the paid services totaled over $600. Additionally, the business owner needs to have the subcontractor's address, social security number or federal ID number. Without these, completing the form will be much more difficult, and tax season will be full of headaches. In order to simplify it all, one should send out a Form W9 to each subcontractor at the moment of hire.
2. Figure out every personal expense
Sometimes, a small business owner forgets to keep track of their personal finances. This isn't a good idea, and instead, it could help to look over both personal and business banking data at the end of the year. Entrepreneur magazine explained that these two expenses should be separate. If they aren't, it is a great idea to sit down and try to figure out which bill goes where. It is surprising how many people overlook this important step, because a lack of clarity often means that business owners end up spending more on their taxes than they otherwise would have.
3. Spend money to save money
Tax deductions sound great to any small business owner. These can save a person a lot of money each year, but not everyone may be aware of all the great deals to be had. According to Thomson Reuters Corporation, 2013 has a bigger Section 179 deduction available than next year. This means businesses can deduct up to $500,000 of qualified property purchases, while 2014 will see the amount decrease. Therefore, it may be wise to move quickly.
In addition, the depreciation rule for heavy SUVs may be a smart investment, the news source noted. This includes all SUVs, trucks and vans weighing over 6,000 pounds. If a company uses it for business, it opens up several possible deductions. For example, the heavy SUV Section 179 deduction and the 50 percent first-year bonus depreciation for all vehicles entered into service in 2013.
4. Donate to charity
There is more than one way for a small business owner to save a little money on their taxes. For example, one could donate to charity, according to the U.S. Small Business Administration. It is the holiday season, after all. A lot can be given away and still earn a tax deduction afterward, such as clothes, toys and much more. In order to file taxes correctly, one must receive all proper documentation and retain receipts for the goods.
Overall, small business owners should pay close attention to their business banking as tax season nears. Heeding a few key financial tips can mean a lot of extra savings, and there are plenty of available options for a person looking to reduce their tax liability.