Sage 300 Online
Sage ERP Online
Sage Payment Solutions
Sage Payroll Services
In the flurry of launching a new business or first startup, filing your taxes can be a real learning curve. You won’t want to wait until the last minute to try to figure things out. At the very least, it could lead to money left on the table — or worse, costly penalties or other legal repercussions.
To make sure your new business is handling its tax obligations properly, run through these eight common mistakes:
The best way to stay on top of your quarterly tax obligation is to get into the practice of automatically setting aside a percentage of each payment or revenue. Then, take stock of your profit/loss statement at each quarter and pay your quarterly bill accordingly. A financial advisor can help you estimate these payments if you need some help.
To qualify, your home office needs to be used exclusively for business purposes. This could be a dedicated room or part of a room in your house. But holding a meeting at your dining room table or working from your living room couch won’t entitle you to the deduction.
If you do qualify, you can write off a percentage of your home expenses including rent/ or mortgage payments, utilities and insurance costs. You can read more about it in IRS Form 8829.
When it comes to equipment, there are a couple of approaches: You can write off a portion for each year the appliances are in use, or write off the full amount — there’s a max limit here — for the year you purchased it. So, if you bought a few new laptops for the business in 2013, you can write off the full price with your 2013 return — but you’ve got to report these purchases as a capital expenditure by filing Form 4562.
If you mistakenly deduct your equipment or capital items as supplies, the IRS could determine that you improperly characterized the expense and that you’re not entitled to the deduction.
If you don’t file on time, you can expect up to a $250 penalty for each form you needed to send. You can check out IRS Form 1099-MISC for more details on which types of payments require a 1099.
If you end up reporting $3,000 in deductible business gifts for the year, make sure you can back that up. It means you gave out gifts to at least 120 different people. You can read more about deductible gifts here.
Your startup’s legal structure affects how you report your taxes and how much you pay, so it’s important to choose the right entity. For example, many start out as a sole proprietor or partnership, then find themselves paying too much in self-employment taxes. Creating a C Corporation, S Corporation or LLC that is taxed like an S Corp could help lower their tax bill.
A quick discussion with a tax advisor or CPA can help you figure out which structure is right for your situation.
Above all, any startup or small business owner must think of taxes as a year-long obligation, not just something to revisit once a year.
We have a variety of accounting products for self-employed people as well as startup, small, and midsized businesses. Our products are flexible enough to travel with you even, for bookkeeping on the go or in the field. More than that, Sage also has a vast network of accountants who can help.
Sage has more than 30 years of accounting experience. Let us help you.
View Accounting Software and Accountants Network
© 2015, Sage Software, Inc. All Rights Reserved. Sage provides small and medium sized organizations and mid-market companies with a range of easy-to-use, secure and efficient business management software and services - from accounting, HR and payroll, to payments, enterprise resource planning and customer relationship management.