Small business advice that will save you thousands
Tax season for most of us brings a lot of pressure and for the typical entrepreneur record keeping errors inevitably follow. Tax deductions go unclaimed, paper trails go awry, all because of the lack of a bookkeeper.
So let’s review eight of the most common tax preparation mistakes that small businesses make so that you can spot them and take appropriate action to save your business thousands of dollars.
Expenses worth analyzing
New business owners can write off start-up costs incurred before opening the doors OR you can assign these values to an account that will amortize annually.Amortization is a process similar to depreciation, but it is used for non-tangible assets. Don’t overlook this important decision. Click here to learn more.
Often times there’s a lot of confusion about legitimate auto deductions. A good rule of thumb for mileage is if it is to conduct business or generate a sale then it is a business driving expense. If you are just commuting to work, then it is no longer a business expense that mileage should be reported as personal. The one exception is if you work from home and deduct a home office.
The Standard mileage deduction for the tax year 2016 is 54 cents per mile.
Do not be one of those business owners that only writes off mileage for automobile expenses.
Fuel and oil changes, tires, car insurance, lease payments, travel tolls and parking fees are all tax-deductible business expenses if you can prove they are directly related to business.
The power of petty purchases
Small everyday expenses can add up, and cash receipts can disappear quickly. Make sure you or your bookkeeper track all your expenses and check with your tax advisor about what you can and can not deduct.
Guesstimates just won’t cut it anymore
Before the internet of things, guesstimates and projections were a common occurrence in tax filing, however, now your accountant should have an obligation to make sure you do not overdo or exaggerate your deductions. Dramatically fluctuating business expenses that are considered abnormal for your industry or business type will leave you vulnerable in the case of an IRS audit.
Only one slice of the pie
The IRS is not the only organization that relies on credible record keeping and accurate tax information. The EDD requires accurate record keeping and business tax information. Financial service providers like banks, credit unions, insurance companies, and loan financiers need accurate recordkeeping and business tax information.
Personal tax deductions, non-deductible personal expenses, and business expenses
You will save thousands of dollars by separating your personal and business bank accounts. A significant cause of confusion around tax time that makes tracking income and expenses difficult is forgetting to separate personal from business and deductible from non-deductible. We can help! Click here for more details
Are you on payroll?
Payroll tax compliance is tedious and something that many small business owners struggle to keep current. The financial consequences of getting it wrong aren’t pleasant either. To make sure that your payroll taxes are deposited correctly, outsource your payroll function to a payroll company. The benefits often far outweigh the fees.
Keep your records up-to-date
This is a common problem for small businesses and often leads to missed opportunities for reducing your taxable income for the year. Make sure your expenses are reconciled, tracked and supported with receipts (the IRS requires it). Spend time each week to review your accounts – receivable, payable, credit card transactions, bank statements. Monitor your cash flow to determine if your business is growing, consider accounting software (which synchronizes all your financial operations and activities in one centralized dashboard) or hire a bookkeeper
About the Author:
Dezmone Hooks is a small business owner, a writer, and a business tax and financial consultant.
Dezmone works with Hooks Financial Services a team that focuses on the tax filing for families, entrepreneurs and small business with the objective to promote their growth and success. Follow Dezmone on Twitter: @ for more of the latest tax tips and business advice.