Tax Deadline Looms. Don’t Panic.
 By Terry M. Blair

As a startup business, this may be your first year of wrestling with business tax forms. And with April 15 fast approaching, you might be working yourself into panic mode.

Don’t go there. Instead, take these tips, follow these guidelines and use these tax resources from AFS.

No 1099? No Problem.
Many sole proprietors receive a Form 1099-MISC from clients each January. This form shows the amount of money a client paid you during past year.

You don’t attach the form to your federal income tax return. But, on your income tax return, you must report the income shown on the 1099.

What if you haven’t received a 1099 from a client? In that case, simply report the amount of income you earned from that client.

If you file your tax return and later receive a Form 1099 for income that you did not fully include on that return, you should report the income by filing Form 1040X, Amended U.S. Individual Income Tax Return.

Won’t Have Your Return Ready? File For An Extension.
If the clock runs out before you get your taxes done, you can get an automatic six month extension of time to file. That will give you until October 15 to file your tax return.

However, this extension of time to file does not give you more time to pay any taxes due. You’ll need to estimate how much you’ll owe. You’ll also need to pay those taxes and file for an extension by the April 15 deadline.

Be as accurate as possible when estimating how much you’ll owe Uncle Sam. If the balance of the tax due is paid with the filing of your income tax return, no penalty for failure to pay will apply unless the unpaid amount is more than 10 percent of your total tax liability.

See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, available at www.irs.gov.

Can’t Pay Your Taxes? You Have Options.
You can apply for an IRS monthly installment agreement using the Web-based Online Payment Agreement Application. The application lets you self-qualify, apply for and receive immediate notification of approval.

The amount of your installment payments and the number you make will be based on the amount you owe and your ability to pay that amount. Be aware that an installment agreement is more costly than paying all the taxes you owe on time.

The IRS will charge interest and penalties on the unpaid portion of the debt. And installment agreements come with a user fee. The one-time fee is currently $52 for direct debit agreements and $105 for non-direct debit agreements.

Another option is to charge the taxes you owe to a credit or debit card. The IRS doesn’t charge you a fee for this option. But the card processing companies do charge convenience fees. To learn more about this payment option, go to the IRS Web page Pay Taxes by Credit or Debit Card.

AFS Tax Resources.
You still have time before the April 15 deadline to get your taxes ready to go. AFS can help minimize your headaches with two great resources.

1. Start with TaxCentral. Here’s just a sampling of what you’ll find:

• The exclusive Schedule C Interactive Tax Planning Tool will help you calculate your business profit and loss. You can review a sample Schedule C and line item information related to your specific business. You can even complete a Schedule C for your business.
  
  
• As a self-employed business owner, you’re required to pay self-employment tax on the net earnings from your business. Many new small-business owners are unaware of the self-employment tax. But TaxCentral explains it all and helps you calculate the tax.
  
  
• Lots of startup businesses operate in a home office. But taking the home office deduction can be confusing. The TaxCentral home office calculator will help you estimate the amount of the deduction that relates to the business use of a portion of your home. Simply enter the specifics related to your business space and the estimated expenses for maintaining your home to see how much your home office deduction could be.

2. Got questions about completing your tax forms? Turn to the certified public accountants at ProTax who can answer your questions within one business day. AFS Members have unlimited access to ProTax at no additional charge.

(Posted April 2008)

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