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Midyear Tax Preparation Tips

June 29, 2017 / by Mary Kimmel
Active accountant checking receipts in her office.jpegDepending on how they're structured, different businesses have different tax-filing requirements at different times of the year. But regardless of the type of business you have, taking the following steps at midyear will help ensure you're ready come tax time.

Keep Up to Date on Your IRS Forms
Many small businesses rely on a network of "service providers" — e.g. accountants, electricians, contract laborers — in addition to full-time employees. If you pay an unincorporated service provider more than $600 during the year, you must provide them with a 1099 form at the end of the year. It is good practice to have all new service providers fill out a W-9 form before paying their first bill. Take the time now to make sure you have a W-9 form for each service provider. If the service provider is a corporation, then there's no need to send a 1099, with one exception: All attorneys (paid more than $600) need a 1099 whether they're incorporated or not.

File Everything in Its Proper Place
Midyear is a good time to drill into your P&L statement to make sure everything is coded properly. This requires discipline. If you have an unusual expense that's difficult to categorize, such as a piece of equipment that was vandalized, it's tempting to file it under "Miscellaneous" or "Other Expenses." Now is the time to recategorize the items that are still in the Miscellaneous and Other categories.

Stay on Top of Your Fixed Asset Depreciation Schedule
Most small businesses purchase "fixed assets," which can range from buildings to cars to computer equipment, during the course of the year. Your business is entitled to a tax break for depreciation on such items, which the IRS defines as "an annual allowance for the wear and tear, deterioration, or obsolescence of the property."

The "property" must meet certain requirements for you to claim depreciation — it must have "a determinable useful life of more than one year," for example. But a good rule of thumb is to immediately add any item that costs more than $500 to your depreciation schedule. At the end of the year, your tax accountant can decide if it belongs there or not.

Get a Jump on Your Tax Records
Check to be sure all your tax-related documents are together and your bookkeeping and filing are up to date. Yes, it might be difficult to focus on tax preparation in June. But six months from now, you'll be glad you did as you hand a neat, complete file to your tax accountant with plenty of time to spare.

Topics: Chicago Far West Suburbs, Bookkeeping 101

Mary Kimmel

Written by Mary Kimmel

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