Top Ten Questions You Need to Ask Your Accountant about Tax Time
Filing taxes is a stressful event for most people, but it can be especially so for small business owners. If this is your first year running a business, then you will need to be aware of some questions that are specific to filing taxes for businesses. Here are ten of the most important tax return questions for small business owners.
1. What Information Do I Need to Keep?
Your accountant will need certain paperwork and receipts to fill out your tax information and make sure that you receive all of the deductions you qualify for.
2. What Direct Business Expenses Can I Deduct?
Knowing how many of your expenses you can deduct will help you plan for filing taxes during the year. More often than not, you can deduct the money that your business directly spends on services, rental space, equipment, and other items. As long as there is no gray area, such as in the case of home businesses, an expense will usually qualify as deductible.
3. Is There Anything I Should Do to Increase My Savings?
Sometimes, you will get a bigger deduction for buying certain items, such as an energy-efficient air conditioner-as opposed to a standard one-for your office. Knowing these answers will help you plan for filing taxes when you are deciding on a purchase.
You can learn more about tax deductions and the type of purchases that can be cited in your return by purchasing tax return software.
4. How Much of My Home Office Is Deductible?
If you work from home, this will be an important question. You can deduct utility and mortgage or rent amounts that you spend on your home office, but there are certain guidelines you must follow. Your accountant will know the exact answers that pertain to your situation.
5. How Much of My Car Is Deductible?
If you have a car that use for business purposes, you may be able to deduct part of your payment, insurance, and maintenance costs at tax time. This is especially true if you use the car only for those purposes.
6. How Much of My Household Bills and Equipment is Deductible?
You may also be able to write off a portion of your household bills, such as Internet and phone. Also on the list could be your home computer, printer, and fax machine, depending on how much you use these items to run your home business.
7. How Much of My Travel Expenses Are Deductible?
While most business-related travel expenses are tax deductible, there may be exclusions or special rules if you brought your family along or turned it into a mini-vacation for yourself.
8. What Are the Special Requirements for Business Deductions?
If you plan to take deductions for a home office, a car, travel expenses, or household bills and equipment, then you will need to know the rules of doing so. For example, the portion of your home that you write off as your home office must be a space that you use exclusively for business purposes.
9. Does the Legal Structure of My Business Matter When Filing Taxes?
Maybe you are a sole proprietor looking to incorporate or trying to decide between LLC and S Corp; either way, you will want to know how your choice is going to affect you when filing taxes.
10. Do My Employees Count as Independent Contractors or True Employees?
This is a very important question because you have more responsibilities for a true employee, such as withholding income taxes and paying a portion of the employee's employment taxes. These are just some of the tax prep questions you will need to ask your accountant. As the rules can change from year to year, it is important to sit down and chat with your CPA before tax time arrives so that you will be ready.