5 Steps to a Painless Tax Return
1) Knowledge is Key
Study current tax laws. Small changes may mean huge savings for business owners, such as the 2008 tax deal that increased the limit on deductions for businesses. “The 1040 instructions have a section that explains the changes, or, if you’re using packaged software, it will prompt you as well. And obviously, if you’re using a tax practitioner, they’ll be aware of any changes,” says Mark Hayes, partner at Honolulu-based accounting firm CW Associates.
2) Turn to the Experts
Whether you’re just starting or scrambling at the 11th hour, consulting a tax adviser can save you time and money. Not only can he or she advise you on any special deductions you can take, they can be a great resource if you tap them early enough. “Using a practitioner can be an advantage in terms of planning in advance for your tax return, because they’ll keep you apprised of any changes relating to your specific business throughout the year,” explains Hayes.
3) Get the Extra Credit
Tax credits save you more than deductions, so consult your adviser to find out which ones you’re entitled to. Common credits include: employer social security credit, investment credit, disabled access credit, work opportunity credit, and research credit.
4) Go Digital
“To the extent possible, use some type of software or computer program to keep business records,” suggests Hayes. Whether it’s a robust package like Quickbooks, or simply scanning your receipts into your laptop, it’s always easier to work with digital files when it’s time to file. Also, document all deductible items. As tedious as it may be, saving all receipts and keeping clean income and expense records will save you time and energy in the long run.
5) Look into Solar
The new photovoltaic credit is a solar credit for businesses, and, depending on your circumstances, installing solar may be worth the investment. “It’s extremely expensive, but if it makes economic sense for the business, there are some significant tax benefits that can be gained,” says Hayes.