Common Tax Info Needed
Here is a list of common tax information that we need to prepare your tax return. The following information can help you get organized. Usually we can reduce your tax (and tax preparation cost) with complete information. Why pay more tax than legally required? Some of these items include the following:
- Information on stock sold
- This Stocks Sold or Disposed Form will help you list the necessary information. Although you should get a 1099-B from your broker reporting the sale, sometimes this does not provide all the information required to calculate your gain or loss.
- Property tax on vehicles
- This is an itemized deduction on Schedule A just like property tax on your home or other property. This is the larger amount paid to the town or city during the registration process.
- Information on business assets
- Use these worksheets to list information about your buildings, equipment and vehicles. Although business equipment can usually be expensed in the first year, we still need this information for your tax return:
- Examples of typical business expenses
- Here is a list of common expenses that most businesses need to track. This expense category list will help you get started.
- Keeping track of auto expenses
- This is one of the most challenging bookkeeping tasks for a small business. Many small businesses use autos for both business and personal. See Business Use of Autos for what you need to know.
- For new clients, we need information on prior year's tax return(s)
- Please bring your prior year's return(s) so that we can carry-over any tax items to this year. We also can check your prior year's return(s) for any errors or omissions.
Business Use of Autos
Generally, there are two methods of deducting business use of a vehicle.
The actual expense method involves keeping records of all expenses related to your vehicle such as gas, maintenance, and depreciation. On a newer vehicle, the larger depreciation gives typically a larger deduction (early in the depreciated life) over that of the mileage method. After the end of the depreciation on the vehicle, your only deductions would be gas, maintenance, insurance etc. Depreciation can run as long as 5 years, typically is accelerated and starts when the vehicle was placed in service for business use. Other options for depreciation include expensing elections that further increase deductions in the first year(s). See Expensing Vehicles for more information.
Remember that you still need to keep a log of your business mileage. Even if you use the actual expense method, you need to have documentation of your business use. Mileage logs provide a method of allocation of expenses between business and personal.
The mileage method is to use the standard mileage rate. This method involves multiplying your business miles by a rate determined by the IRS. Publication 463 lists the standard mileage rates for the prior year. These change every year and sometimes more than once a year. This is supposed to provide a deduction that, on average, is equal to the actual expenses of running an auto, including depreciation, repairs, gas etc. If you use your vehicle for personal use, keep a log of your business miles.
Remember to keep track of tolls, parking, town tax and interest on your auto loan. These are deductible (for the business portion) under either method.
Variations on the methods include switching from one method to the other. One restriction for switching is that you must have used straight-line depreciation under the actual expense method to switch to the mileage method.
You can imagine scenarios where one method would be advantageous over the other. The actual expense method might provide a greater deduction with a new vehicle when depreciation expense is high. The mileage method might prove better for an older vehicle that is reliable and has few repairs.
Expensing Vehicles
The most flexibility for depreciation occurs when a business purchases a vehicle over 6000 lbs. gross vehicle weight (GVW). Cargo and most 3/4 ton trucks qualify. Generally, we are able to deduct the full cost of this type of vehicle (considered business equipment) in the first year of service, as long as there is enough net income from the business. Other more limited expensing elections are available for vehicles under 6000 lbs. GVW.
One drawback of this election is that there are no remaining deductions for depreciation in the following years (if you elect to expense the entire amount). If business income increases, you may be paying a higher percentage of tax in following years. Still, many businesses have the most need for cash in the early years of their business.