As we move into 2015, many small and mid sized business owners are coming off of a year end tax season that may have left them wanting to do more to be better prepared the next time around.
We asked our CFO, and resident tax guru Steve Brown, what small business owners can do in the New Year to ensure that they are filing properly and getting the deductions they deserve.
His advice to business owners is simple-don’t be afraid of being audited, and keep meticulous records. He offers these tips to ensure your next round of business tax preparation goes smoothly.
1. Keep a Diary
For seven years, you should keep a record of everyone you meet with, along with your business mileage. While most business owners are aware of the deductions associated with business travel, most don’t keep the proper records to do so. Don’t lose out on potential deductions because of bad record keeping.
2. Seek Out a Tax Pro if You Work From Home
A home office can be a great way to reduce business expenses, but will fall under tighter scrutiny during tax season. There are deductions available, and seeking out a tax pro to guide you is probably your best bet to avoid filing mistakes.
3. Track Your Spending
If possible, all business expenses should be put on one credit card for easy tracking. Having all of your business expenses in one place makes pulling them out for your tax preparer a simple task. It also provides a back up for any receipts you may misplace. You should also be keeping a journal listing your expenditures. Your business receipts and journals should be kept for a minimum of five years.
4. Review Your Income Regularly
Significant changes will change your quarterly payments, and can change the way you need to file.
Even if you are short staffed, make sure you don’t shortcut documentation. From keeping a diary of everyone you meet with to tracking business mileage, to everyday expenditures, your records should be meticulous. The more documentation you have, the better you can insulate yourself when it is time to get ready for tax season.
5. Don’t Be Afraid of an Audit
Many business owners miss out on deductions they rightfully deserve because they are afraid of IRS scrutiny. If you are keeping records properly and working with a tax professional, there is nothing to be afraid of. The IRS will never come back and tell you about deductions you should have or could have taken, and if you properly documented everything and kept all of your receipts, there is really nothing to fear.
Always use the tax codes to your advantage, but remember – the bulls and the bears make money, and the pigs get slaughtered.