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Washington Watch - April 13, 2011

Wednesday, April 13, 2011

Last Minute Tax Tips

Small-business owners who have put off doing their 2010 tax return so far this year have less than one week until Tax Day. The National Association for the Self-Employed (NASE) has one piece of advice – don’t panic.

“As long as you have all of your paperwork gathered in one place before starting and take the time to check your math, you’ll likely have no problem getting your return filed by April 18th,” said Keith Hall, NASE’s National Tax Advisor. “If you don’t think you’ll make it in time, you can get an automatic 6-month extension by filing Form 4868 and pay the tax you think is owed by April 18th.”

Hall offers these last minute tax tips for small-business owners who are starting to sweat:

  • Check for hidden deductions: If you work out of your home, your office may qualify for a deduction. Do you drive to the post office or a client site? Those miles may add up to a sizable deduction too.
  • Retirement Savings: Retirement savings, such as SEP contributions and IRA deposits, are deductible for last year’s tax return up until April 18, 2011. That means you can count money deposited into these accounts, up until the day you file your 2010 tax return. In the case of SEP contributions, those can even be made up until an extended due date, as late as October 15th.
  • Filing Date: If, despite all your rushing around, you still can't make the April deadline, relax. All tax filers can get an automatic 6-month extension by filing Form 4868 by April 18th, which you can download from the IRS Web site at http://www.irs.gov/. However, an extension of time to file is not an extension to pay. If you do not send the IRS what you think you owe, you'll be stuck with late fees and interest.
  • Proofread the form: Most of the mistakes on tax returns are simple addition and subtraction errors. Check your math. Then, check your math again.
  • Start thinking about next year:  While micro-business owners may be tempted to finish their return and not think about taxes again until next year, now is a great time to reflect on how to reduce your 2011 tax liability. Consider deductions for a home office or employing your children; create a health reimbursement arrangement, which would enable the business to reimburse bona fide employees for all out of pocket medical expenses; reconsider the tax implications of incorporating your business; and research retirement plans designed specifically for the self-employed, including an IRA, SIMPLE, SEP, Single 401(k), and Keogh plan.
  • Look for help: Sole proprietors doing their own taxes can find help from a number of sources, including the NASE’s Tax Resource Center, where small-business owners can ask the NASE’s CPAs and tax professionals a question and hear back within a few business days. The IRS also offers a Web site (http://www.irs.gov/) and toll-free help line, 1-800-829-1040, for your tax questions.

House Congress Approves 2011 Budget

In the final hour, a government shutdown was averted last Friday with both sides agreeing to nearly $40 billion in spending cuts, in order to fund the government through September.

Kristie Arslan, Executive Director of the NASE, released the following statement as the threat of a Government shutdown loomed and its potential effect on America’s small business community:

“A Government shutdown is a win for nobody – especially America’s small business community,” said Arslan. “The Government shutdown will send ripple effects throughout the economy. With small business loans and tax refunds stopped dead in their tracks, the small businesses that are so critical to our communities and our nation will be unable to grow or reinvest in their business.  Our smallest businesses – the self-employed – will be impacted worse than most because many count on the infusion of capital they receive from their annual tax refund. I encourage President Obama and Congress to work together to ensure our Government stays open and a compromise on our federal budget is reached.”

President Obama’s recent remarks earlier last week from Pennsylvania regarding a Government shutdown and its potential effect on small business:

“When government shuts down, it means that that small business owner who’s waiting to get a loan, suddenly nobody’s there to process it.  He may not get that loan and that business may not open.  And whoever he was planning to hire, suddenly he may not have that job that he was counting on.”


Quick Look: New Deficit Reduction Plan

President Obama is expected to release this week his plan for cutting the deficit, all while Congress and the White House wind up for debates on the 2012 budget and the debt ceiling.

Visit http://www.whitehouse.gov/ for more information.


Washington Watch Online

Visit NASE Advocacy to view archived editions of Washington Watch. While you’re there, read the latest updates from the Washington, D.C. office, write your Congressperson, and find out how you can join the fight for micro-business.