Avoid Frequent Tax Mistakes
It is important for small business owners to keep good records. Complicated tax laws cause many small business owners to make mistakes in bookkeeping and record-keeping. However, business owners can avoid making some of the common mistakes with a little forethought.
Following are some of the common mistakes small business owners make and how you can avoid making the same mistakes:
- Not saving receipts for expenses under $75.00. There are some expenses the IRS does not require receipts for - meal and entertainment expenses if the cost is under $75.00. However, you still need a record of what you spent, where, who you were with, the business relationship, and the purpose of the expense. When you look at the requirements it is in your best interest to keep the receipt with written information about whom you went there with and why. Make sure the receipt is also date and time-stamped.
- Treating an equipment expense as a supply. Equipment is considered a capital expense and it has to be depreciated. Supplies are items that are used up in a short period of time. Check with your accountant on tax laws for equipment purchases as they change frequently.
- Forgetting to track reimbursable expenses. As a small business owner you will no doubt have to pay for some expenses out of your own pocket or with a personal credit card. Don't make the mistake of losing track of those expenses and having the company fail to reimburse you.
- Miscalculating automobile deductions. There are different ways to calculate deductions for the use of a car or truck. Find one that suits you and stick with it. You can either take a standard mileage deduction or a deduction for expenses, but you cannot mix and match.
- Giving more than you can receive. You can offer gifts to clients and business associates. Just check with your tax professional to make sure that you are not going overboard here. There is a limit on the amount of deduction you can take for these items.
Keeping receipts and good records does not have to be a difficult task. Talk with your accountant or tax professional to see what records you should be saving and make sure to pay attention to the common mistakes listed above. A good record keeping system is the only way you will know if your business is making a profit.
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