This is a special episode because this is my first return guest and for good reason. John Eckle is a CPA and has come to give us some tips about out taxes. This episode is packed with tips for write-offs and forms you may need. I have never had a contracted employee but John gives us some tips on what we need to consider.
Obviously we are just touching the tip of the ice burg when it comes to taxes in this interview but it’s my goal to give you some information so you can at least start getting the dialog going with who ever is doing your taxes.
Below is a list of links we mention and below that is an outline John sent me to help you be the most prepared and questions to consider.
Make sure you’re subscribed to the podcast wherever you listen and if you know anyone who could benefit from what John shared please pass this along. 🙂
The book I recommended “Small Time Operator” is available on Amazon. It’s a great book feel free to check out the ratings! The edition I linked here is the 14th Edition. Personally, I have the 13th edition.
I. How to be prepared for your meeting with a CPA, Enrolled Agent, or Tax Preparer
a. Different types of tax preparers
b. Begin collecting official documents by the end of January
1. i.e., K-1s are often late, and are not required to be issued until 4/15 each year!
c. If you own a business, bring your annual P&L, and if available, a balance sheet and cash flow report as well.
1. If the 1099s totals are greater than your reported revenues, you have a problem and should discuss this with your tax preparer.
1. the date you began using it for business
2. the total miles you drove for the year (ideally, beginning and ending odometer readings)
3. the miles you drove for business purposes. You should be able to provide a log of these miles, if requested. (Note: The IRS requires this detailed log of each business trip)
1. It must be a room used exclusively for business (family rooms and garages don’t usually qualify, in most cases)
2. Any improvements or repairs to the room (shelves, storage, painting, electrical) may qualify
3. You must use it exclusively for production or meeting with customers or clients.
4. If a room (or your garage) qualifies, you can write off a portion of your rent, mortgage, insurance, property taxes, utilities, etc… of the entire house, based on a ratio of square footage for the room, compared with the entire house. You can also add depreciation
5. WARNING – However, if you depreciate, then you will have to recapture….
d. Mistakes business owners make:
1. If the expense is in any way related to your business, ask!
1. Loans or business cash transfers are not income, nor are they expense, unless they include some form of interest for the use of money.
1. Although not against the law, this is not best practice
2. Remember, if you are audited, you will have to provide all your records related to business income and expense, to the IRS
1. This may cost something (usually around 30 min to an hour’s billed time.
2. You should also ask what you can do before year end to reduce your tax liability
e. How to get 2017 off to a good start
1. purchase an easy to use accounting software to track income and expenses
2. become familiar with your P&L and Balance Sheet
a. get help from a professional if you don’t understand what you are doing
b. commit to reconcile your bank and credit card statements on a monthly basis
3. Value your accounting records as much as the product or service you are providing – be diligent and consistent
4. If you prepare your own tax returns, consider hiring a CPA or Enrolled Agent to prepare your returns
a. Ask to meet with them ahead of time for a tax projection, and for ways to reduce your tax liability