Tax Time Tips for EntrepreneursBy Amanda Lewan on January 8th, 2015 /
It’s that time of year again. The holidays have wound down and tax time is right around the corner. How can you prepare?
CPA Kathy McCallum offers a few great tips for avoiding tax troubles and getting the most from your return. Kathy works with a number of local businesses in the area and has over 25 years of accounting and finance experience. You can join Kathy on January 21st for a special tax time lunch & learn.
Check out our short Q&A with Kathy McCallum below.
What is one or two common problems you often see businesses face as they do their taxes?
Most new businesses do not realize that they need to make quarterly estimated taxes for both federal and state. Not doing so can cause penalties.
Another tax trouble which is often overlooked is self-employment tax which includes Social Security and Medicare. Most taxpayers don’t realize that employers must match the Social Security and Medicare which is withheld from an employee’s payroll which adds up to 7.65% of their gross pay. When you are self-employed you must pay the matching portion and the withholding portion so that any profit over $600 is taxed at 15.3% (7.65% + 7.65%).
Are there any incentives or write-offs most commonly overlooked?
If you are a consultant and you require a deposit or retainer for your services, you should not include that as income until the retainer is used or the project is billed. For example, you contract with someone to design a website and require a deposit up front which they pay in December. You do not complete the project until the following January at which time you bill the remainder of the project. The entire amount of the project would be picked up when it is finished. The deposit should not be claimed as income in December.
Anything you want to add about your upcoming lunch & learn event?
Learn how your business is taxed. Make sure you know if you’re a Single Member LLC vs Multi- Member LLC vs Sole Proprietor. Also know what records you need to keep for your Accountant in order for them to do your tax return. You can learn more about this on January 21st for a tax time lunch & learn.