If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The fourth-quarter due date is now here.

Normal due date: Tuesday, January 16, 2018

Remember, you are required to withhold at least 90 percent of your current tax obligation or 100 percent of last year’s federal tax obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:

• Underpayment penalty. If you do not have proper tax withholdings, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a payment at the end of the year may not help avoid the underpayment penalty.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it were made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
• Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter when you pay your estimated taxes.
• Don't forget state obligations. Except for a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.

*If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.

​The IRS recently announced mileage rates to be used for travel in 2018. The business mileage rate increases by one cent. The medical and moving mileage rates are also raised by one cent. Charitable mileage rates are unchanged.

​Remember to properly document your mileage to receive full credit for your miles driven.

Recording and reporting business expenses is a missed opportunity for many business owners and employees. Much of what you spend for business purposes is tax-deductible. ​Knowing whether you can or can't expense a purchase for business purposes can be difficult. Nevertheless, here are a few general guidelines to help.
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​According to the IRS, business expenses must be ordinary and necessary to be deductible. That means they are normal and recognized in your business, as well as helpful and appropriate. You'll need to keep records (such as statements and ledgers) and supporting documents (receipts and invoices) to verify your deductions. Some expenses are subject to extra requirements, as described below.

​Travel expenses pertain to business trips and can include transportation to and from airports, your hotel and business meeting places. They also generally include lodging, meals, tips and other related incidentals.

​Entertainment expenses need to be either directly connected to or related to the conduct of your business. That means that business is the foremost purpose of the activities and it's very probable you'll get income or future business benefits as a result. Expenses from entertainment that aren't considered directly related may still be deductible if they are associated with your business and occur just before or after a significant business conversation.

​Business use of your personal car is calculated according to your actual business-related expenses, or by multiplying your business mileage by the prescribed IRS rate (53.5 cents per mile in 2017).

If you operate a business out of your home, you may be able to deduct a wide variety of expenses. These may include part of your rent or mortgage costs, insurance, utilities, repairs, maintenance, and cleaning costs related to the space you use.

It is a tricky area of the tax code that's full of pitfalls for the unwary. Here are some of the top mistakes people make:

1. Not taking it. This is probably the biggest mistake those with home offices make. Some believe the deduction is too complicated, while others believe taking a home office deduction increases your chance of being audited. While the rules can be complicated, there are now simple home office deduction methods available to every business.
2. Not exclusive or regular. Your home office must be used exclusively and regularly for your business. Exclusively: If you use a spare bedroom as a business office, it can't double as a guest room, a playroom for the kids, or a place to store your hockey gear. Any kind of non-business use can invalidate your deduction. Regularly: Your office should be the primary place you conduct your regular business activities. That doesn't mean that you have to use it every day nor does it stop you from doing work outside the office, but it should be the primary place for business activities such as record keeping, billing, making appointments, ordering equipment, or storing supplies.
3. Mixing use with other work. If you are an employee for someone else in addition to running your own business, be careful in using your home office to do work for your employer. Generally, IRS rules state you can use a home office deduction as an employee only if your employer doesn't provide you with a local office. Unfortunately, this means if you run a side business out of your home office, you cannot also bring work home from your employer and do it in your home office. That could invalidate your use of the home office deduction.
4. The recapture problem. If you have been using your home office deduction, including depreciating part of your home, you could be in for a future tax surprise. When you later sell your home you will need to account for this depreciation. The depreciation recapture rules create a possible tax liability for many unsuspecting home office users.
5. Not getting help. There are special rules that apply to your use of the home office deduction if:
   • You are an employee of someone else.
   • You are running a daycare or assisted living facility out of your home.
   • You have a business renting out your primary residence or a vacation home.

​The home office deduction can be tricky, so ask for help, especially if you fall under one of these cases.

​​There's a simple "safe harbor" home office deduction. You take the square footage of your office, up to 300 square feet, and multiply it by $5. This gives you a potential $1,500 deduction under the simplified option. However, your savings could be much greater than $1,500, so it's often worth getting help to calculate your full deduction using the standard rules.

Most new businesses start with no thought about legal structure. In the eyes of the IRS, the default structure is a "sole proprietor," in which your business profits are taxed on your personal tax return. This can serve you well to start, but there are several reasons you may want to consider incorporating as your business grows.
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1. To protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game.
2. To provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business.
3. To issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation.
4. To gain tax flexibility. A corporation can provide you with more tax flexibility. Deliberate planning can help optimize the taxable division between corporate income, dividends, and your personal wages.
5. To enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise, and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors and other businesses often prefer to do business with incorporated companies. 

Of course, there are other business structures other than sole proprietorships and corporations. The right structure for your business depends on your unique situation.

The EITC or Earned Income Tax Credit, is a benefit for working people who have low to moderate income. Millions of taxpayers who earned $53,505 or less last year may qualify for EITC for the first time in 2017.

If you are self-employed, a farmer, or another type of worker and earned $53,505 or less last year, you could receive a larger refund if you qualify for the EITC. If you have three or more qualifying children, you could get a maximum credit of up to $6,269. Unlike most deductions and credits, the EITC is refundable. In other words, if you are eligible you may get a refund from the IRS even if you owe no tax. Last year, more than 27 million eligible workers and families received almost $67 billion in EITC; with an average EITC amount of more than $2,455.

The IRS recommends that all workers who earned around $54,000 or less learn about EITC eligibility and use the EITC Assistant to find out if they qualify. The tool will help you to determine if you qualify to receive the EITC and estimate the amount of the credit you could get. Remember, to get the EITC, you must file a tax return and specifically claim the credit.

A new law approved by Congress requires the IRS to hold refunds claiming the EITC and the Additional Child Tax Credit (ACTC) until Feb. 15. By law, the IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they are owed by giving the agency more time to help detect and prevent fraud.

The IRS has announced the 2017 standard mileage rates. These rates can be (but are not required to be) used to calculate the deductible expenses of using a vehicle for business, charitable, medical or moving purposes.

The standard mileage rates for the use of a vehicle in 2017 will be:

• 53.5 cents per mile for business miles driven, a 0.5 cent decrease from the 2016 rate
• 17 cents per mile for medical or moving purposes, which was 19 cents for 2016
• 14 cents per mile driven while serving charitable organizations

The business mileage rate was reduced half a cent per mile and the medical and moving expense rates each fell 2 cents per mile from 2016. The charitable rate is designated by law and will not change.

The standard mileage rate for business is based on a yearly study of the fixed and variable expenses of operating a vehicle, unlike the rate for medical and moving purposes, which is based solely on the variable expenses.

Using these rates is optional. You can always calculate the actual cost of using your car instead.