In years past, we have sent out a detailed business guide to make you aware of certain tax documentation that may be needed in the preparation of your business tax returns. It hasn't had the positive impact on our clients in the way that we projected it would, whether that is because it was too much information to gather and prepare for us at one time or simply, our clients are just too busy to take advantage of the streamlined process to guide you through the assembling of your business tax documentation.
This year, we are taking a pro-active approach to simplify this process so that you can take a small amount of time each week to gather important documentation for your tax return(s). We think if you take advantage of this approach, you won't feel so overwhelmed, because you can prepare a little information at a time instead of trying to put it together all at once. We will send you 1 email a week, each Friday, that will have 1 to 2 Tax Preparation Nuggets in a 6-week series to focus on gathering and placing everything in a tax folder for us. If you give us this small amount of time each week, we believe strongly that these nuggets may help to put some "gold" back into your pockets.
The first week's nuggets refer to 1099s & Vehicle Mileage Logs.
If you paid any individual or company (other than a corporation) over $600 in parts & labor in 2015, you are required to issue them a 1099 for the work they performed. If you do not have their personal information (Full Name or Business name (including Inc., LLC, etc.), Tax ID #, Complete Address, and Business Entity Type), you will need them to fill out a W-9, which is included as an attachment to this email.
It is very important that you have all of the required information when you pay vendors. A good habit to get into is to have each vendor fill out a W-9 before you issue them a check for business services. We have had several clients in the past few years who have been fined several thousands of dollars by the Internal Revenue Service for not adhering to these rules. 2015's penalties for non-compliance have been almost double from those of 2014.
Vehicle Mileage Log
If you use your personal vehicle for business purposes, you can claim a portion of the car's operating expenses as a tax deduction against your business income. The IRS allows you to calculate this one of two ways:
A) By adding up all of your vehicle operating expenses (loan interest, lease costs, gas, repairs,
maintenance, and insurance) and taking a proportional rate of those expenses computed by
dividing the total business miles driven throughout the year by the total miles driven on the
car (business & personal) in 2014.
B) By determining the total business miles driven throughout the year and multiplying it by an
IRS mandated mileage rate for that specific year.
Please remember, for both methods, you are required to keep track of your business mileage in a vehicle log. This can be as simple as listing the dates the personal vehicle was used for business, descriptions of where you traveled, and total miles driven in a blank notebook.
Or you can opt to have an easier method, a phone app, which we find to be extremely easy to operate. We suggest the app (it comes in both Android & Apple) that is called TripLog - Mileage Tracker. The price ranges from a free version to a business version that costs $25 annually and alleviates any stress from trying to recreate all of your business mile records. All you have to do is search for TripLog in the Apple or Android stores.