When it’s time to get your taxes in to the IRA, all your hard work over the year can come to naught in the heat of the moment.
When you’re under intense pressure mistakes happen. But they needn’t.
We’ve compiled these small business tax preparation mistakes to avoid from the pros. These are key areas to focus on to keep your nose clean with the IRS and other tax-receiving entities that apply.
Read on to be in total compliance.
It’s the Little Things that Matter
You’re in business, so every little bit helps. Don’t neglect the little nooks and crannies that can save you on your tax bill.
Petty cash is a sizable expense chunk which can most likely be claimed. Skills upgrades through classes, subscriptions to magazines and other “little things” Add up.
Keep track of items like these and then, check in with your tax person to make sure that all those little things are deductible.
While you’re claiming deductions, it’s easy to get into the “I’m going to claim this and see what happens” groove. That’s not a great idea.
Exaggerating deductions is a good way to obtain the unwelcome interest of the IRS. That can mean an audit.
The higher the expenses claimed (especially if they’re viewed as excessive for your sector), the more likely it is you’ll get the kind of attention you don’t want, so tread lightly and check in with your tax advisor.
Keep ‘em Separated
If you’re like a lot of small scale entrepreneurs, you may struggle to compartmentalize income and expenses into two separate areas – business and personal. It’s easy to get them muddled.
Your bank accounts may be separate, but do you occasionally draw from your business account to pay for something personal and vice versa? A lot of people do.
Things can get even muddier if you work from home. Ensure that your business space is segregated from the rest of the household both physically and in terms of expense tracking.
Keeping your spheres separate is a best financial practice.
The Payroll Monster
Many small business owners have problems with payroll. You’re far from alone if that describes you. 40% of small businesses get dinged with over $800 in IRL penalties every year, on average.
It’s well worth getting someone else to do your payroll. Sure, it costs more, but ensuring that your payroll taxes are properly deposited is golden. It’s a big deal and you want to get it 100% right.
Stay On Top of It
Above all, staying on top of your record keeping is your best defense against running afoul of the IRS. Take the time each week to ensure that all entries are up to date and that they correspond to reality. All expenses must be accompanied by receipts, so ensure that these are filed electronically and in physical form, should the need arise for original receipts.
Norton Financials is your own personal finance department, taking the books off your hands. Contact us to find out more.