Money Matters

6 Last-Minute Tax Tips

It’s almost time to pay the taxman. If you haven’t filed your returns, don’t fret. These tips can help ease the pain. 

Typically, nail techs are creatives, not organized number crunchers. Between the stress of finding every receipt and then adding and balancing totals, tax time can bring more anxiety than the holidays, especially when you wait until the last minute. Phil Strawn, a CPA in Binghamton, N.Y., gives techs some practical ways to make this time of the year a little less taxing.

 

1. Stop fighting it. “You are a minor partner with the government,” says Strawn. “Embrace it.” Every year Strawn hears the moans from people who watch their hard-earned money seemingly disappear and the groans from those who don’t want to tackle the year-end reconciliation. While nobody enjoys writing the check to the government instead of themselves, the government expects a percentage of taxes on your earned income. Period. “It is what it is,” says Strawn.

You have two ways to respond to this: Set up a system of tracking receipts and expenses so you can easily produce accurate bookkeeping records, or operate loosely all year and hope to god you don’t get audited. Strawn suggests the first. Once you finally realize procrastinating, complaining, or resisting is futile, you’ll be in a better position to work with the government. Your part is to track income and expenses, send accurate estimates, and keep receipts for all deductions. It behooves you to do your part well, because the government always does its part: collect your debt.

 

2. Don’t forget the often overlooked places for deductions. “You can’t change what you did last year,” says Strawn, “but you can rethink — or re-look at — where you’ve spent money.” One place to re-evaluate is where you spent money from the household budget to purchase items that were actually used for business. Many small-business owners work while they’re home, so some expenses associated with home expenses may be able to be partially written off as a business expense. Strawn points out three areas where small-business owners often overlook what may be places they could save: Internet, cell phone, and gas (or mileage). Mileage especially is overlooked, such as the miles you accumulate when you are business prospecting, driving to another salon to teach, train, or attend classes, or picking up supplies.

Home-based techs who designate a section of their living space exclusively to a salon area are able to deduct a portion of everything in the home—including rent or mortgage, utilities, snow removal, etc. Whatever portion of the house is used becomes the percentage of each bill that can be expensed.

Think of ways you could be “transferring costs,” instead of thinking only of “expenses.” Some people are too careful, and they miss deductions. “When a person is self-employed, every dollar is multiplied,” says Strawn. “Every dollar is worth digging for, and you want to dig deep.” But stay honest; if you claim expenses, be prepared to show a receipt.

Becky Tyner, office manager and tax preparer for Jackson Hewitt, reminds business owners to deduct depreciation value. “Typically depreciation value comes from large items, such as furniture, sinks, and cabinets, which are expected to last for years,” explains Tyner.

Receipts can be laborious, but careful records are what allow you to claim as many deductions as possible. “If you have the paperwork, the IRS would be less likely to question it,” says Strawn. “If you don’t have the paperwork, you can’t substantiate the expense, and the IRS will throw it out.” You may be reading this and wishing you had been more diligent about setting up a system of receipts. You’ll have to write this year off as a loss, but start now with your current receipts. “Think of it as a deferred resolution,” says Strawn.

 

3. It may not benefit you to ask for your refund. Let’s say you saved $1,000 to pay your quarterlies. Then you realize you’re going to get $1,000 back from having overpaid earlier in the year. “Instead of writing a check to the government and then waiting for them to send you a check in return, just leave your money in the bank,” says Strawn. “Roll the money you are entitled to receive into your quarterly payment.” This way the money you’ve saved becomes your “tax return.” It’s yours to use and invest now, instead of waiting a number of weeks for the check to arrive in the mail. “If someone files early, they may not want to do that,” says Strawn. “But if you’re waiting until April 15 to file, and that’s the same day your first quarterly is due, it makes sense to roll the refund over as that quarter’s payment.”

 

Keywords:   income     taxes  

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