When tax season rolls around, sometimes the easiest steps are also the easiest to forget. This is no time to get careless. So, as you start gathering your books this year, here's a checklist to run through, to ensure that you're maximizing your company's deductions -- and minimizing your stress level.
Most small businesses use accountants for tax preparation -- don't delay a meeting to prepare for filing. If you do go it alone, purchase tax-preparation software (like TurboTax Premier).
Don't miss out on unknown opportunities. For instance, there's a new domestic production activities deduction for certain businesses that can provide big tax savings.
In addition to your books, gather receipts and other needed tax documents. You might want to request an annual statement from your credit card company if you haven't received it -- expenses on the statement are organized by category, which is a big help come tax time.
It's not too late save for your golden years while gaining a valuable tax deduction. Contributions for 2005 can be made up to the extended due date of the 2005 return (e.g., October 15, 2006). If you don't yet have a plan set up, you can use a SEP (simplified employee pension).
For example, decide whether to expense (deduct now) the cost of equipment purchases made in 2005, or to depreciate the cost over a number of years (typically five or seven). Profitability, qualifying for the domestic production activities deduction, and other factors will influence this decision.
Net operating losses, home-office deductions, credit carryovers, and other items from prior years may be used on this return.
If you can't file your return on time, request an automatic six-month filing extension. Keep in mind, the filing extension does not extend the time to pay your tax, so pay any outstanding liability to avoid interest and penalties.
Income-tax obligations usually must be paid through estimated taxes. Make sure to have funds on hand to meet this quarterly obligation. Try the government's EFTPS (www.eftps.gov), an electronic-payment system to debit your bank account for taxes. Enroll and then schedule payments at your convenience.
Income taxes are not the only concern of small businesses. There may also be local property taxes, sales taxes, and employment taxes to consider. Your failure to attend to any of these obligations can result in unnecessary penalties.
Commit to keeping good books and records if you haven't been doing so. Explore new write-off opportunities for this year, like a new deduction for making commercial space more energy-efficient. Adopt employee benefit plans to attract and retain valued employees -- and gain tax benefits to boot.
For more tax advice, visit Inc.com's Law & Taxation Resource Center.