By Asharp Bookkeeper
Many people will concede that tax time is the worst of all times of the year for them. It often brings along a sense of urgency and a level of pressure that is not good for business. Mistakes tend to follow inevitably. Some of them come out of omissions while others are as a result of limited experience.
Some get their tax deductions going unclaimed, awry paper trails and costly surprises are prone to arise. This is not to say there will always be mistakes. However, there are some tax preparation mistakes that are witnessed from time to time among small businesses. Here are a few of them.
Few realizations are more agonizing than that of forgetting to include a tax deduction in a tax return you just filed. These deductions are pleasant as they lower your overall tax bill or increase your tax refund on. Certain expenses are one of these deductions.
Imagine then, that you have just written off all expenses at the end of March Then in early April, you come to understand that these were useful expenses that are actually ground for tax deductions. How do you feel?
Here is an example of a deduction that you might have overlooked. Medical expenses they can often turn out to be mind-blowing. And the IRS aware of that so they are sympathetic in certain circumstances. The majority of taxpayers are required to have their medical expenses exceed 7.5 percent of the gross income in order to be considered a viable deduction. If you are a self-employed person responsible for your own health insurance cover though, you are allowed to deduct 100 percent of the cost of your health insurance premium.
Unknown to some, your car might save you a great deal of cash at that dreaded April 15 time of the year. More so if you drive the car as part of your work. All you need is know what the Turbo tax says about your car-related deductions. This knowledge can be extremely handy in ensuring that your automobile works just as you to safeguard your paycheck.
This is where many small business owners get it wrong. The fact is, if you use your car exclusively for purposes of your business, you are entitled to a deduction of the car expenses. However, if your car doubles for both your business and personal commitments, then you have to divide the expenses based on your car’s actual mileage.
You can make car expenses work for you. It all starts with knowing all of the auto-related deductions that you are entitled to.
Another mistake to avoid as a business owner: limiting your deductions to mileage. As long as you can prove that the driving expense are related to your business then you should deduct the costs of gas, tolls, oil, insurance, tires, lease payments and parking fees.
Certain cases are just the very opposite of what we have discussed above. Some businesses overdo or exaggerate their deductions. Such cases ill only attract the Internal Revenue Service to conduct an audit of your business. This is never the most favorable thing to happen to your business.
Let your accountant help you ensure that you are including only the figures that should be included as deductions. There are admittedly areas that will be difficult to know whether you can deduct a hundred percent of only in part. Most people assume for instance that traveling meal costs or client gifts are fully deductible. They are not. These are the reasons why we have tax preparers. The professionals fully understand the tax system and will not only advise but also help you prepare your tax returns within the law.
We are talking about the petty expenditures: magazine subscriptions, petty cash purchases, educational classes and others. Little as they may appear, the only little thing about them may turn out to be only their name. These minor expenditures can add up real quick. Ensure you keep track of all of them and let your tax professional advice you about those that you can deduct.
The Internal Revenue Service may be the main shadow of taxation but not the only one. Some small businesses think so much about pleasing the IRS that they tend to forget about the other tax obligations that include property taxes, local taxes, payroll, excise duty and self-employment taxes. The list can be longer. But the message is precise- don’t forget.
So, are you running a small business? Did you feel guilty somewhere while reading the text? If so, it’s a great thing that may be the last time you made that mistake. Bravo.
Asharp Bookkeeper|
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