The extended day of May 17th to file taxes is just around the corner. Hopefully you have had a chance to get your taxes done, but if you are still working on them, here are some tips that may help now and in the future.
Owning a contracting business means there are a lot of factors that come into play. You likely have a team of employees and you may have different types of income streams that need to be reported.
Your accounting methods are very important. Keeping great records is key to making sure that tax time is easy. Be sure you are recording everything regularly so that you don’t have to waste time looking things up later or miss something important that could cost you a deduction.
Be aware of AMT
Taxes are complicated and that is why we have accountant. They are the experts in what is going on and any new changes we should be aware of.
That being said, you still want to make sure you are fairly knowledgeable on some aspects of taxes, such as the Alternative Minimum Tax. AMT places a floor on the percentage of taxes that must be paid by filers. It recalculates income tax by adding certain tax preference items into gross income.
Talk to your accountant to make sure you are doing the calculations correctly. A common mistake most contractors have with AMT is calculating AMT income using the percentage of completion method. This can cause small companies to be out of compliance because they calculated their original income using the cash basis method and calculated their AMT the same way.
Understand loan compliance for the new PPP loan
This past year, many businesses applied for and received Paycheck Protection Program loans. If the loan was used to maintain payroll it could be altered to a grant. We advise you to ask your accountant if your loan was a loan forgiveness and if it is taxable income or not, based on your State’s rules.
Understand Sales Tax
Sales tax varies from state to state. If you do business in multiple states make sure you are aware of the sales tax laws in each state.
Tax time can be a stressful for everyone but taking the time to organize throughout the year will make it easier in the long run.
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