Uncle Sam Wants Your Money; Prepare for 2014 Taxes Early

Each year, changes in federal income tax laws complicate the lives of individual taxpayers, small business owners and even highly-trained accountants and tax attorneys. The situation for 2013 is shaping up to be no different. While tax law changes that may apply specifically to your company should be discussed with a CPA or tax attorney, there are common strategies that you may be able to employ now to prepare for 2014 taxes early.

Prepay Business-Related Expenses

Printer cartridges, photo stock , business cards, thumb drives, Internet subscriptions, mail meter charges, paper, pens, envelopes – the cost of incidentals that are necessary to keep your office running can really add up. As a small business owner or, the money that you spend toward keeping your office equipped with necessities can be deducted from your income as business-related expenses, so you might want to stock up on extra paper and ink cartridges now if your budget can handle the additional expense. Just make sure you keep good records!

Do you anticipate major business-related expenditures that would normally be payable during the early part of 2014? In many cases, you can prepay those expenses now and realize measurable savings on next year’s tax bill. Membership fees for professional organizations, which can run into the hundreds of dollars, are an excellent candidate for this strategy. Hardware such as computers or printers are also good candidates for prepayment. Check with your accountant to determine which specific business-related expenses, if any, could or should be paid before year’s end.

Rethink the Home Office Deduction

In the past, many home-based entrepreneurs and small business owners shied away from claiming the home office deductions because of the complexity involved with claiming the deduction, along with the fear of triggering an audit from the Internal Revenue Service. However, if you can document that the space that you are declaring is used exclusively to conduct business, there is no reason to give up on a legitimate deduction.

The IRS has even given you a break in claiming the deduction.The complicated calculations that involved taking percentages of household utility bills and which left many entrepreneurs scratching their heads have been eliminated. Beginning in 2013, the IRS established a single streamlined rule that allows you to deduct up to 300 square feet at $5 per square foot for a maximum of $1,500 per year.So if your “office” is a desk in the corner of your den, measure the area around your desk and deduct accordingly.

Investigate Health Insurance Options

The Affordable Care Act, commonly known as Obamacare, does not fully take effect until January 2014. However, the open enrollment period for the health care exchanges begins on October 1, 2013. If you are a small business owner who employees fewer than 50 employees, you can purchase health care coverage beginning October 1, 2013 through the Small Business Health Options Program (SHOP). If your business employs fewer than 25 full-time equivalent employees with average wages of less than $50,000 and you pay at least half of your employees’ health insurance premiums, you may qualify for a Small Business Health Care Tax Credit. If you are a solo entrepreneur, you may qualify for the Premium Tax Credit. Both credits can significantly reduce health care costs.

Develop a Year-Round Tax-Planning Habit

Along with considering specific deductions and tax credits, you should begin developing a year-round tax-planning habit. Begin gathering your receipts and logs to determine where there are gaps in your documentation. By starting now, your records should be in good order when high tax season rolls around next April. You will not only save yourself the stress of a last-minute scramble to file your taxes on time, but you will also be more likely to claim all the deductions and credits to which you are legitimately entitled.

This article was written by staff writer Audrey Henderson. Her mission is to help fight your evil debt blob and get your personal finances in tip top shape.
Photo: x_jamesmorris