Tax Tips: Know Before You File

Interest. If you’ve taken out a business loan, record how much you’ve paid in interest. That figure is fully tax deductible, but make sure not to commingle these funds with personal expenses.

Computer Software. Though software usually has to be depreciated, it can be part of a write-off with an entire computer system in one year if the software came with the computers.

Charitable Contributions. Unless the store is a corporation, these contributions can transfer to your personal filing.

Advertising and Promotion. All advertisements can be listed as current expenses. Similarly, all promotional endeavors are deductible as long as the link between the promotion and the event is clear.

Tax law never stagnates, so the 2007 filing features a few notable changes from previous years. If your store hired anyone in 2007 as part of welfare-to-work, be aware that the deduction has combined with the work opportunity credit. Make sure to investigate whether any of your employees were on welfare in 2006 or 2007, and download Form 5884 to claim the deduction. However, the deduction is only valid if you turned in Form 8850, the Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to your state work agency within 28 days of when the welfare-to-work candidate began work for you.

Another change comes from the self-employment tax on Social Security, but this one is not necessarily in your favor. This year, the maximum amount of net earnings subject to this tax climbed to $97,500, which affects many store owners, particularly the ones with high yearly salaries, as they generally are their own bosses.

Keeping Records

Well-organized records will make it easier to prepare your tax return and help you answer questions if your return is selected for examination, or if you are billed for additional tax.

Records such as receipts, canceled checks and other documents that support an item of income or a deduction appearing on your return should be kept until the statue of limitations expires for that return. For assessment of tax you owe, this generally is three years from the date you filed the return. For filing a claim for credit or refund, this is generally three years from the date the original return was filed or two years from the date the tax was paid, whichever is later. Returns filed before the due date are treated as filed on the due date.

by John Carlisle and Jenifer Hunt

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