Despite the inevitability of taxes, people still frantically dash to the post office every April 15th. This year, with preparation, careful record-keeping, and our basic tax guide, you can avoid the last-minute tax marathon and ease into the tax season without headache or heartache.
This Q & A guide should not be construed as formal legal advice, but rather as an educational and informational tool. The answers, compiled from responses by a team of tax experts, including H & R Block, Money Minds, and the American Institute of CPAs, offer general tax-filing guidelines. Tax law changes continually so you may find hiring a tax attorney, a certified public accountant, or other advisors invaluable to your business.
Q: What can be considered sources of income?
A: Sources of income include any compensation you receive, including sales, commissions or awards.
Q: What can be considered a business expense?
A: Operating costs required to run your business are considered business expenses and may be deducted. To be deductible, a business expense must be ordinary (common in your field of business) and necessary (appropriate and needed). Expenses might include, for instance, telephone use, advertising expenses, wages, interest on business loans, etc. Business expenses must remain separate from all personal expenses. "Every business expense is required somehow to be proven in one manner or the other," advises Mary Lou Pier of the American Institute of CPAs (AICPA). "The biggest mistake people make is not keeping track of their deductions."
Q: How should I keep my receipts and arrange my files?
A: Your records must be permanent, accurate, and complete. Keep your business expenses separate from your personal ones, including a separate bank account and a separate credit card. Be sure to support all of your receipts?you must provide a canceled check to prove payment of expense items. Everything is record-keeping, according to Money Minds, a financial advisement service in Chicago, Illinois. Overdo it rather than under do it.
Be as specific as possible with your receipts. Keep a record of each and every expense in as much detail as possible. Always note the who, what, when, where and why.
Q: How long should records be kept?
A: Keep records for at least seven years. You can make storing your yearly tax records easy by placing them in manila folders in boxes, which you should label and date. Put these in your basement or attic so they don't take up too much home/office space.
Q: Where can I find free tax help?
A: There are a number of IRS tax publications available. To order free publications and forms from the IRS, call (800) 829-3676, or visit the IRS Forms Distribution Center closest to your area, or stop by the IRS website at http://www.irs.ustreas.gov. For general tax information, call (800) 829-1040.
For more information:
Money Minds (800-ASK-A-CPA) offers personal financial advice and will answer tax and income questions. For $3.95 per minute, an expert will answer your questions (a typical call lasts from five to 10 minutes). If you're a first-time caller, Money Minds puts a cap of $25 for your entire conversation1x
