If you opened your business in 2011, you are now faced with the task of filing business taxes. For some businesses, this isn’t a challenging task but for most, it involves some tax regulations that were never encountered for individual or family tax returns. Here are a few ideas that may help.
If you didn’t register your business as an LLC or other entity with your secretary of state, make that one of your 2012 goals. Keeping your business financials separate from your personal finances not only protects you legally but it makes your tax return easier to navigate. Registering your business won’t make your profits subject to double taxation like some people believe. You’ll still be able to claim it as pass through income in most cases. It’s inexpensive and there are plenty of online business registration sites that will help you with this for a minimal cost.
Your business may not have earned positive revenue in 2011. That’s understandable especially if it was your first year in business but if that’s the case, watch what you deduct. The IRS may examine your deductions more closely if you have negative proceeds. If you deduct it, make sure you have adequate documentation to go with the deduction.
The home office deduction allows you to deduct the costs associated with your office if you work at home but it’s not as easy as it sounds. In order to qualify you have to meet some IRS guidelines including the exclusive use rule. If you use your home office for anything other than for your business, you can’t take the deduction. If your desk is in the dining room, you don’t qualify.
There are other stipulations you have to meet before claiming this deduction so make sure you understand the IRS guidelines before writing it off.
Business taxes are more complicated than your family taxes and for that reason, getting help is well advised. If you do nothing else, consider having a tax professional look over your return before you submit it. You may have missed a deduction that could result in a smaller tax bill.
Remember that paying more taxes than you have to degrades your business’ profits. As you enter your second calendar year, have a system for keeping track of receipts and deductions so you don’t have to rely on your memory when you’re preparing your 2012 tax returns.