Taxes and Tax Information

Don’t the complexities involved in doing your taxes bug you, specially, if you own a small business? Following and getting familiarized with the guidelines laid
down by the IRS for small businesses is very important.

In case you hire other employees for your business, you should attach two forms on your, as well as your employee’s, behalf. The W-4 form gives the details of
the withholding allowance and the filing status of your employee to the IRS. W-4 form is better known as the Employee’s Withholding Allowance Certificate.

The other important document to be filled up is the Form I-9 that gives the proof of eligibility of every employee to work in the United States. It’s also known as
the Immigration and Naturalization Service (INS) certification. In case you’ve any confusions or queries regarding filling up these forms, you can directly call up the
INS.

There are a few things that can be done to make sure that the process of filing your taxes is smooth and easy while taking into consideration that you are a
small business owner:

a. There can be nothing like getting familiarized with the taxing procedures for small businesses. You can directly contact the IRS either by calling them, or by
mailing them online. You’ll then be able to get all the information that you need on the deductions that you need to make, the cost of depreciation on your machinery,
and queries on how to fill up the different forms.
b. Logging on to the IRS Small Business website might answer all your questions. The IRS has framed a special program known as STEP, or Small Business Tax
Education that you can go through to understand the overall tax structure.
c. There are many state governments that offer special tax deduction packages to many small business owners. You can check from the local authorities about these
incentives and fill up your tax forms.
d. Be careful about classifying your employees in tax forms. Sometimes the IRS mixes up the actual employees with the contractors. Therefore, you should be clear
about the process of classification.
e. Another tax tip for small businesses is that you should be aware of the sales tax that is applicable on your kind of business. The taxing authorities need to check
your permit that enables them to collect the sales tax. Not having a permit, or authorization is considered to be a criminal offence, so you should get registered as
soon as possible.
f. In order to file your taxes, you should be prepared with all your documents and paperwork. The audit, stubs, records, licenses, permits, receipts, and all the other
documents should be placed in order. Organizing all your documentation is also important.

Other than following the above mentioned tax tips for small businesses; you also need to maintain an order in your business. Maintaining your accounts and other
documentation, keeping a track of the filings by your employees, and accessing your tax beforehand with the help of your accountant, will save time and money.

Tax Tips for Small Business Owners / Tax filers:
http://www.tax-definition.org/tax-tips

Tags: state tax, taxes, tax attorney, tax reduction, pay less tax

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What are you doing this January? If you’re a small business owner, you’re getting together your tax records to hand-deliver to your accountant. Or, you’re firing up your pencil sharpener and setting aside 8-10 days to do your taxes yourself.

If you’re the type who scrambles to find receipts, statements and other financial documents, you probably think tax season is a huge headache.

It doesn’t have to be.

You’ve probably heard that any successful business needs to create systems. Systems allow you to thrive, because they will ensure that your business keeps working even when you aren’t. You can teach your systems to others (employees, partners, downlines) and exponentially increase your revenues, while maintaining great customer service.

Same goes for recordkeeping. Take some up-front time to plan a system and put it into place. Then, all that remains is to follow the system, consistently and diligently.

Do you use an accountant to prepare your taxes?

If you do, get your money’s worth! When you deliver this year’s records, ask: “What’s the best recordkeeping system you’ve ever seen? Who’s your favorite client at tax time and why? How do they do it?”. Every accountant I’ve talked to has a client that’s come up with a superb way to track tax information. So why re-invent the wheel? Learn their system, and copy it.

A Paper System That Works

If you can’t beat ‘em, join ‘em. Rather than develop your own way to track revenues and deductions, use the IRS’s system. Create a business activity tracking sheet right from the schedule you use to file your taxes.

Start by grabbing a copy of your business entity’s tax form at www.irs.gov. For example, if you’re a sole proprietor, you would use a Schedule C in conjunction with a Form 1040.

To create your tracking sheet, set up three columns. In the first column, list every line item from your tax schedule. If you use Schedule C, you’d start by listing your revenues: “Gross Receipts”, “Returns and Allowances”, and so on. You’d continue with expenses: “Advertising”, “Car and Truck”, “Commissions and Fees”…until you reach the end of the IRS form.

Label the second column “MTD” for “Month-To-Date” and label the third column “YTD” for “Year To Date”. Make 12 copies of your new tracking sheet.

Take twelve manila folders and label them with each month of your fiscal year. Make sure to include the fiscal year on the label, too. Put one of your tracking sheets in each folder.

Now for the system. Each month, put all your receipts, statements and reports in the appropriate folder. On the last day of the month, total your business activity in the MTD column using the appropriate line items. To calculate the YTD column, simply add the current month’s MTD to the previous month’s YTD. (Your YTD is a running total for the year.) When you reach the final month of your fiscal year, the YTD column will represent your final tax figures.

Prefer software?

Just because you use a software program such as Quicken, Peachtree or Quickbooks doesn’t mean your financial information is readily accessible at tax time. You still need to make sure your paper records back up your digital entries.

Take twelve manila folders and label them for each month of your fiscal year. Again, don’t forget to add the year.

Put all your receipts, statements and other supporting documents in corresponding monthly folders. On the last day of each month, run income statement and balance sheet reports from your software for the month you’re closing out. Put these reports in the manila folders, too.

When the year is over, run final reports from your accounting software covering the entire fiscal year. Bundle your manila folders together and put your year-end reports on top.

Deliver to your accountant; he or she has everything they need to put together your tax return.

Another variation on this system: Create folders for each line item on your tax return. Again using Schedule C as an example, you would create a folder for “Advertising”, another for “Car and Truck Expenses”, and so on. Put supporting documents in the appropriate folders. Your accountant will likely work off your software reports and use your supporting documents to double-check your figures or seek additional deduction opportunities.

Final tips for success

A great system isn’t worth beans unless you actually use it. Schedule your monthly recordkeeping tasks in your PIM or daily planner. Make it a habit to regularly file business documents and/or make entries in your accounting software. A good rule of thumb is to schedule at least one hour a week for recordkeeping.

If you think your time is better spent elsewhere, hire someone to do your recordkeeping for you.

Either way, when next tax season rolls around, you won’t have to pull out the extra-strength headache tablets. You’ll just pull out your files instead!

Copyright 2006 Leo J Quinn Jr Enterprises, LLC

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With tax season coming upon us, I decided to sit down with Amanda Mills of Loose Change, Inc. and capture some of the wisdom she’s gained in over 20 years experience as a financial and business management consultant for artists.

The tax system can be hard on artists. Artists just don’t fit into a typical career path of making a set amount of money and then increasing that slightly year-by-year.

Here are the 7 most important lessons I learned from speaking with Amanda about artists, money and taxes.

1. Make your passion into a business. Claiming to the world, the government and yourself that your art is a business is a hugely important step that requires courage and confidence. Reporting the income you generate from your art shows that you’re taking your art and yourself seriously.

Actions: Consider the beliefs that are underlying your decision of whether or not to report your earnings as an artist. And by all means, consider hiring a professional like Amanda Mills to help you out.

Amanda’s clients value her unique expertise and understanding of the arts because she takes them seriously. Other accountants might look at the small earnings of an artist and ask, “Why bother?” Amanda treats your identity and earnings as an artist with respect and gives them the attention they deserve.

2. Fund your passion with a supplemental job. A “day job” doesn’t have to be something that makes you miserable. If it is, it’s costing you a lot more than you’re earning and you’d be better off finding something else.

Look at the big picture - your supplemental job doesn’t have to be something you’re passionate about; its function is to provide the funding for what you ARE passionate about.

Here’s where a supplemental job can really make things easier with taxes. Let’s say your supplemental job is teaching at a university, and you make $80,000 a year. You’re also a sculptor, and you’ve established your sculpting as a business.

You spend $40,000 on your sculpting in a year. Because it’s a business, you can claim that as a business expense. So, instead of paying taxes on the $80,000 you earned at your supplemental job, you only have to pay taxes on $40,000. That could save you over $13,000 in taxes.

Action: Weigh out the costs and earnings of your “day job”. Consider the financial costs (child care, gas, transit, parking, clothing, supplies, training, etc.), time costs (travel time, time spent at work, bringing work home with you, etc.), mental costs (getting distracted trying to solve work problems when you’re at home, or other stressful thoughts related to work), and lastly the emotional costs (being miserable in a job you don’t like, interpersonal conflicts with colleagues, or feelings that the job or company is not aligned with your personal values).

3. Art is life and life is art. For artists, there’s much more of a blurred line between personal and professional life.

Whether you’re taking a trip, having lunch with a friend or seeing a movie, chances are that what you’re doing will influence your creative work in some way.

And if you’re not directly absorbing inspiration, you’re fueling it in your conversations, by talking about your work. And so these activities can often be deducted as business expenses.

Action: Keep track of everything you’re spending money on and keep notice of how it affects the business of your art. Get receipts for everything and keep these in a folder, envelope or box marked, “Expenses”.

4. Live at the bottom of the curve and keep your footprints small. Artists often have an irregular flow of income coming in, so managing cash flow can be tricky. It’s important to see the low times (when less money is coming in) as “normal”, and budget yourself to be able to live on that. Keep your footprints small by minimizing the costs of your lifestyle.

Then, when good times happen and some money is rolling in, you’ll be able to take care of some bigger things - get the car fixed, for example, or put some money aside for the next low time.

Action: Save three to six months of living expenses. Start small, just by putting aside one week of expenses. This is the best step you can take to reduce the impact of a fluctuating income.

5. Flatten your income. Artist incomes can vary wildly from year to year. One of Amanda’s jobs is to “flatten” a client’s income out from one year to another. Sometimes that’s purely on paper and sometimes that’s through strategic actions on the part of the artist.

It’s especially important that by your third year in business, you’re showing some earnings as an artist (that’s often the “red flag” point of time for the tax collectors).

Amanda recommends that her clients help this along by making extra efforts to book shows, apply for as many grants as possible, or by donating their artwork to charity.

Actions: Be mindful of the ebb and flow of your income, and how that will show on paper at tax time; not just this year, but in the history and future of your art business. Also, be sure and tell your tax preparation specialist about any upcoming opportunities on the horizon.

6. Think ahead and get your records organized. Contrary to the myth of the “flaky artist”, Amanda finds that most artists are quite organized.

Actions:

1. Get started by checking out the resources at Amanda’s Artbooks site (see below).
2. Find all of your revenue and expense receipts, sort them and add them up.

7. Come to peace with paying your taxes. Think of it as rent for your country. If you’re making money at your art, get someone to figure out what percentage of your gross income goes to taxes, and send in your taxes as regular payments throughout the year.

Otherwise, unless you’re incredibly disciplined at setting these amounts aside, you’ll end up scrambling to come up with this big lump sum of money at tax time. This is a recipe for fiscal disaster.

Action: Decide upon quarterly or monthly tax payments, or perhaps pay after you’ve received a big payment such as a grant or a paid lecture.

© Linda Dessau, 2006.

Linda Dessau, the Self-Care Coach, helps artists enhance their creativity by addressing their unique self-care issues. Feel like your creativity is blocked? Visit http://www.genuinecoaching.com to sign-up for your complimentary copy of the popular e-course, “Roadblocks to Creativity”. And for more information about artists, money and taxes, check out Amanda’s websites, http://www.loosechange.ca and http://www.loosechange.ca/artbooks.html

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