For many small business owners, tax season can be the stuff of nightmares. If April 15th makes you cringe, help is on the way. Anna Falkenstein, a senior stakeholder liaison for the Small Business/Self Employment Division of the IRS, shares her insider tips on handling your small-business taxes like a pro. Her division focuses on providing outreach and education to partners in the industry, such as chambers of commerce, and organizations like Longwood’s Small Business Development Center.
Falkenstein emphasizes that tax law is revised on almost a yearly basis. Staying informed of these changes is key to tax prep success. Falkenstein recommends familiarizing yourself with the IRS website and regularly checking for tax law updates. One of the biggest overall changes that will affect all taxpayers are updates to the ITIN (Individual Taxpayer Identification Number) program. ITINs are used for those who don’t have a social security number and aren’t eligible to apply for one. Changes to the law require that new applications for ITIN numbers will need to be submitted to the IRS prior to filing time, as well as renewals of previous ITIN numbers. More information on if or how this will affect you or your business specifically can be found on the IRS website.
In addition to the changes in the ITIN program, according to Falkenstein there are a few noteworthy changes to watch for this year that will directly affect small businesses.
“The Work Opportunity Tax Credit was extended through 2019. Section 179 business expenses were permanently extended as well as the exclusion of capital gains for small business stocks held for more than 5 years. I recommend you check the IRS website to see if your small business is eligible to take advantage of this provision,” says Falkenstein. “Due dates for business returns were updated for 2016 also. It is best to refer to the return instructions for 2016 to determine what the newest due dates are. Corporations and partnerships were both affected by this change.”
She also encourages small business owners not to hesitate in asking for help. “There are many organizations available to assist new small business owners,” she says.
Staying organized is critical. Falkenstein advises small business owners to “keep accurate and organized records. Label your receipts and organize them so you can easily determine if a receipt is an office expense or an operating expense, even if it came from the same supplier,” she adds.
She also advises filing your return on time, even if you aren’t able to pay the whole amount. “By filing in a timely fashion,” Falkenstein says, “you will avoid the Failure to File penalty which can be up to 25% of the tax due.”
Lastly Falkenstein says to stay alert for scammers. Small businesses are common targets. Some prevalent tactics are requesting fake tax payments over the phone, “verifying” tax return information over the phone and targeting payroll and human resources personnel posing as a boss or exec to obtain W-2 information on employees. She advises using the IRS website to stay up to date on the latest scams making the rounds.
These simple tips should help de-stress tax time for your small business. For more in-depth information on a wide variety of tax related topics, check out the IRS Video Portal at www.irsvideos.gov. It provides specific topics for small business owners on collections, audits, tax liens, the Affordable Care Act and more.