Putting off doing your taxes only increases the likelihood that you will make needless mistakes and miss legitimate deductions you could be taking. Start with last year’s tax return. If you had income or deductions on last year’s return, there is a good chance you will see the same for this year’s return. Documents including W-2s, 1099s, bank interest statements, and investment account statements can be assembled now to help support the numbers on your tax return. More practical tips follow.
1. Find the right professional. If you plan to use a professional tax preparer, get referrals from friends, co-workers, even clients. Speak to several different professionals. Find someone with the right experience in your type of business and ask about fees and timing.
2. Avoid shortcuts. Take the time to go through the forms and instructions. Save time with online preparation or the use of tax preparation software, but don’t take any shortcuts with the information. And check your math.
3. Save tax dollars with a retirement contribution. Contributions to most retirement accounts such as IRAs, SEPs, etc., can be made right up until Apr. 15. With an SEP plan, you can contribute as much as 20% of your Schedule C earnings to your own retirement and get a full tax deduction.
4. Look for all deductions. Among the most common deductions overlooked by micro-business owners is the use of their automobile, retirement options, and the home office deduction.
Keith Hall National Tax Adviser National Association for the Self-Employed Grapevine, Tex.