Small Business Tax Planning: Avoid Procrastinating

The best way to begin planning for tax filings is to start at the beginning of your fiscal year. Smart small business tax planning means having a process in place can help you avoid last-minute scurrying around to try to find the documents that are needed to file an accurate tax return. Let’s look at some of the records that must be kept during the year and then determine the best way to organize them for more efficient time management at tax time.

Income recording

Depending on the type of small business that is being run, income records may come in various forms. In some cases, income may come from a variety of online sources, many of whom will not report earnings. Keep in mind, that while companies are not required to supply a 1099 form when earnings are less than $600, small business owners are still required to report those earnings. Here are some of the types of income records that should be maintained:

1099 income – Small business owners may receive 1099 forms from clients. These forms should state clearly how much was earned, who the payee was and to whom the amounts were paid.

Interest income – Income that is earned as interest on savings accounts, checking accounts, etc. must also be reported as income. Many financial institutions will send out a 1099-INT form regardless of how small an amount is earned.

Other income – Some small business owners who maintain websites or blogs may earn money from various sources. Affiliate income (from referrals or sales), residual income (earned from writing articles or certain social bookmarking sites) and income earned from jobs such as web creation, blog submissions or article submissions. Often, these amounts will not add up sufficiently through the year to meet the minimum threshold for reporting via 1099. Keeping track of these earnings on a monthly basis through the year will make tax time less stressful.

Expense recording


Every year, thousands of small business owners overlook expense deductions because they are uncertain which expenses are eligible to be deducted. The Internal Revenue Service provides a simple to use explanation of the types of expenses that may be deducted. Here are a few of the types of expenses that should be recorded through the year:

Internet access – Today, thousands of small business owners use the Internet for marketing, social networking with new and potential clients and for storing documents online. Without reliable Internet access, it would be nearly impossible for them to run their business effectively. Don’t forget to keep track of all internet expenses by keeping your monthly bills. Remember, if you work from home, only a portion may be deductible.

These subscriptions are tax-deductible provided that the business owner keeps all receipts for payment. Many at-home businesses, such as freelance writers, may also have other subscriptions including plagiarism checkers, stock image subscriptions and social media automation tools. These expenses are often paid online therefore the small business owner should print and store their receipts.

Outsourcing expenses – Small business owners in all industries may hire a freelancer for various tasks including website creation, blog posting, social media networking, etc. These expenses should also be recorded carefully. Remember that if you pay any single person $400 or more you must file a 1099. In any event, it is a good idea to request an IRS W-9 form from the contractor when they are contracted.

Organizing the Documents

Using the various resources provided a small business owner will be collecting numerous forms, receipts and other important papers during the year. Home filing systems need not be complicated; in fact, they should be simple to use to encourage their use.

Some of them are designed to hang in a filing cabinet while others are easy to store on bookcases. Regardless of what type of storage system you use, using them regularly is the important part. By filing all expenses, earnings recordings and receipts for purchases of equipment (for depreciation purposes), tax time does not have to mean ripping your hair out for days trying to find your receipts. Don’t forget to keep track of all of your charitable donations and business related mileage and business related meals as you will need these when filing your taxes as well.

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