1. Are you using the correct business income tax form?
Be sure you are using the correct return for your type of business:
- If you are a sole proprietor or a single-member limited liability company (LLC), you will use Schedule C of your personal tax return (form 1040) to report your business income taxes.
- If you are a partnership or a multi-member LLC, you will file a Partnership return (1065) and report partner/member share of profits/losses on Schedule K-1.
- If you own a corporation, you file taxes on Form 1120 - U.S. Corporation Income Tax Return.
- If you are a Sub-chapter S Corporation, you will file corporate taxes on Form 1120-S. and report shareholder portion of profit/loss on Form K-1.
2. Have you checked for 2012 tax changes?
Be sure to check for tax changes before you complete your return. Tax changes in 2012 include:
- Reduction in self-employment tax by 2%, from the payroll tax cuts in the Tax Relief Act of 2010. This tax cut is on the Social Security portion of your self-employment taxes.
- Changes in the business mileage rates for 2011 business driving
- Increase in the maximum amount of income (including self-employment income)subject to Social Security tax; the 2012 maximum Social Security taxable income is $110,100.
- You should also be aware of changes in accelerated depreciation on purchase of assets in 2012, including section 179 and bonus depreciation allowances.
3. Are you taking all legitimate tax deductions?
Review "Tax Deductions from A to Z" and the commonly missed deductions articles to be sure you haven't missed anything.
In particular, pay attention to Business Startup Costs
You may be eligible to deduct some of your business startup costs up to $5,000 and organizational costs up to $5,000 (for expenses after October 22, 2004). If your startup or organizational costs exceeded $50,000, your deduction may be limited.
4. Are you eligible for 2012 tax credits?
In addition to continuing tax credits like credits for increasing access for disabled persons (included in the article above), one new tax credit is worth mentioning:Health care costs for self-employed individuals may be used to reduce business taxes. Beginning in 2011 and continuing in 2012, this reduction may not be used to reduce self-employment tax.
5. Do you know how to file electronically?
Filing online (or E-filing) saves you time, it's painless, the IRS says it's 99% accurate, and it speeds any return you will receive. You can use the federal E-File service through a tax preparer or through tax software.
Large corporations must file their corporate tax returns electronically. Here is the IRS requirement:
Corporations that have assets of $10 million or more and file at least 250 returns annually are required to electronically file their Forms 1120 and 1120S for tax years ending on or after December 31, 2006.
To file electronically, you will need to use one the IRS-approved E-File Providers. Choose a provider and follow the directions on their website. The IRS also has several payment options (debit or credit card and other), depending upon the form you are filing.
6. Is your return free of tax audit "red flags?"
Review this article to find out what issues the IRS looks for in a business that can trigger an audit, including:- Hobby businesses
- Hiring your children
- Paying reasonable salaries
- Home business deductions
- Records to support business deductions.
7. Finally, have you checked for errors?
Check for errors before you hit that "send" button or you put your return in the mail. Errors and omissions can delay your return and cause your return to be rejected. Common errors include:
- Incorrect or missing social security numbers or employer ID numbers
- Incorrect tax entered based on taxable income and filing status
- Computation errors in figuring the taxable income, withholding and estimated tax payments, and common credits and deductions
- Withholding and estimated tax payments entered on the wrong line, and
- Math Errors. Both addition and subtraction.
