Many of us are wrapping up the past year by closing out our books. At the same time, we’re preparing for the new year by upgrading our accounting software, reviewing new budgets, and establishing new and improved ways to grow our small business.
Be ahead of the game by making even the smallest applicable adjustments to your bookkeeping now for 2018. One change that may affect your employee expense reimbursements and your deductions at year-end is the new mileage rate of 54.5 cents per mile up from 53.5 cents in 2017.
It’s that time. Small business owners are scrambling to gather their paperwork in preparation for tax season. If you wear several hats in your business, you’re one of many who may be feeling overwhelmed in meeting the multitude of deadlines we’re all facing. In these challenging first months of the new year, it may be a good idea to take the time to make room for improvements now as you discover where you went wrong in the prior year.
One common oversight in the small business is neglecting to process the proper paperwork in anticipation for reporting 1099-Misc forms at year-end. If you’ve hired subcontractors, or independent contractors, throughout the calendar year and have no W-9 Form (requests for tax payer identification number) for them on file, you may find yourself making last-minute requests for information to get 1099-Misc Forms out the door.
A good habit to practice is to have the W-9 completed upon agreement of the contract for employment and prior to commencement of work. Taking it further, if you utilize an accounting software program such as QuickBooks, entering their information and denoting their vendor profile as “1099 eligible” will make the year-end process for outside service providers seamless.
Lastly, keep all W-9 Forms for a minimum of 4 years for IRS purposes. If you rehire the contractor, be sure all information is current, including the mailing address to ensure the recipient receives his/her copies of the 1099-Misc Form.
Click the following link for a printable W-9 Form:
If your business paid an outside service provider $600 or more during the calendar year of 2016 and they require a 1099-MISC Form, it is due to the recipient of compensation on January 31, 2017. Reporting of Box 7 (non-employee compensation) on this form, is also due to the IRS on January 31, 2017.
Other payments reported on 1099- MISC, excluding Box 7, are due to the IRS with transmittal Form 1096 by February 28, 2017.
Many sole proprietors and small business owners choose to pay themselves off the payroll. When making drawings from your company or receiving compensation in the form of a payment from a client, accounting for income tax deductions is often overlooked. Falling behind with bookkeeping or failing to file proper paperwork with federal and state tax agencies is easy to do when busy schedules don’t allow for processing of these tasks.
To avoid accruing penalties and interest on unpaid taxes, estimated state (if applicable) and federal income taxes need to be paid on a quarterly basis and filed with the appropriate form. By adhering to the designated due dates and staying up-to-date throughout the year, annual tax liabilities will be kept at a minimum.
The end result – no surprises and less stress in the following year.