Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.
Make Things Easier When Tax Season Comes Around
Business taxes can be very complicated. However, keeping all of the documents you need and having them ready when you need them can make the process run much more smoothly.
If you keep up with reporting and tracking throughout the year, you will have all of the information you need to fill out your annual income tax return for your business.
Preparing for Tax Season as a Business
If you are a business owner, you likely have enough daily demands on your time. You do not want to make tax time any more difficult than it has to be. You can avoid turning tax preparation into a huge time commitment by taking steps to prepare for tax season throughout the year. Use the following tips to get ready for tax season as a business.
Be Aware of Your Tax Deadlines
Your business’s tax return must be filed no later than either April 15 or March 15 every year, depending on the type of business that you have. Sole proprietorships and single-member LLCs that use Schedule C on an individual tax return coincide with the personal filing deadline of April 15.
Otherwise, all other businesses must file by March 15.
Businesses have various deadlines throughout the year as well. Payment of estimated taxes occurs on a quarterly basis, for example. The IRS provides a helpful tax calendar for small businesses and self-employed individuals to help keep track of these deadlines throughout the year. Staying on top of these will reduce costs for penalties and interest that may accrue if these deadlines are missed.
Collect Your Records and Track Your Financials Regularly
It is a good idea to hang on to your records throughout the year. Store them in a location that is easy to pull out when tax time rolls around.
Examples of items to keep include:
- Bank records
- Credit card statements and receipts
- Canceled checks
- Any invoices that have been paid
- Petty cash slips
- Receipts for subscriptions and memberships
- Professional service fees
- Any other expenses that have been incurred throughout the year
- Income information (evidenced by invoices, copies of checks, or additional notes)
You must also keep these records long after your taxes are prepared, so having a filing system will help keep you organized and efficient.
It may also be a good idea to summarize the information you have on a regular basis by putting it into a spreadsheet or another tracking mechanism. Summarizing your data on a monthly or quarterly basis will make tax preparation easier. It also gives you an idea of how your business is doing throughout the year.
Keeping track of all of this information can be a hassle to do by hand. You may want to consider using automated software to help you keep tabs on your expenses and income. Having this type of software will make tax preparation very easy because tracking software will often have the ability to generate income and expense reports that you can use to input all of your data into your tax return.
Track and Update Contact Information for Employees and Independent Contractors
Remember that as part of filing your income tax return for your business, you also need to send out tax forms to certain employees and independent contractors. You need to have updated information for these individuals, so you know where to send these forms, if necessary.
- W2s: Every employee should get a W2. This document will describe the employee’s total income and how much was withheld for various items, including taxes and many benefit programs. You should also have (and keep) a copy of this employee’s W4 for as long as they are employed by you.
- 1099s: Your independent contractors should get Form 1099 from you if they made more than $600 throughout the year. Be sure you have a W9 from each of these individuals as well.
Failing to properly provide this type of documentation to your workers can lead to fines and other penalties down the road. It is important that you do this and keep copies of these documents to prove that you provided them, in case the IRS asks at any point.
Reconcile Your Bank Accounts Every Month
Some businesses realize that their bank made a mistake or that they are missing information at tax time. By then, however, the error could have already been affecting you for months.
Take the time to go through your bank statements when you receive them each month. It is easier to spot errors and problem areas if you go through this process regularly.
Helpful Deductions for Businesses
Businesses are entitled to deductions for tax purposes, just like individuals. However, some companies do not take full advantage of their deductions — but they should! Deductions decrease a company’s overall tax burden, which is certainly helpful for your bottom line.
As you are preparing for tax season, you should think about potential deductions that you can use and try to work those in throughout the year. Some common examples include:
Charitable Giving
Businesses can deduct contributions to charity just like an individual. However, companies actually have even more incentive to give because this deduction is a dollar-for-dollar reduction in a business’s taxable income if it meets certain qualifications.
Benefits and Bonuses
Your employees’ salaries are deductible business expenses. If you provide your workers with an end-of-the-year bonus, that can decrease your company’s tax obligations as well. The cost of benefits, sometimes including a holiday party, can also be considered a deductible employee benefit as well.
Depreciation and Capital Cost Allowance
The equipment your business uses certainly will not last forever. Unless it is land, virtually every asset your company holds will depreciate in value over time. That depreciation is a business expense that is sometimes overlooked by small businesses. However, depreciation can be a huge cost savings for companies that hold equipment, vehicles, computers and other assets.
Interest Payments
If your company has financing, you can deduct the interest costs of that financing as a business expense as well. In fact, any bank expense or related financial expense is considered a normal business expense that should be included in your costs of doing business.
There are many deductions that businesses can take, but they all have certain qualifications and limitations. You can learn more about those by reviewing the IRS’s helpful guide to business deductions here.
How to File Your Business Taxes
Like individuals, businesses need to file income tax returns. If you have a sole proprietorship or single-member LLC, you will simply include your business income and expenses on your individual Form 1040. However, other business types require that you use different forms to file your return. The information that the IRS needs for a company varies a great deal compared to information for an individual, so the IRS has developed different forms for this purpose.
Businesses can often file electronically by using an IRS-approved provider. You can also prepare your tax forms and mail them in. Many professional tax preparation services have their own e-filing options that they can use for you, too.
Business taxes can be daunting, but tracking expenses and income throughout the year and staying organized can be very beneficial. It will also help you take full advantage of all of the deductions that your business is entitled to receive and spot additional areas for potential savings. Being proactive will not only save you time, but it can also save you money at tax time.