Common Tax Mistakes Small Business Make
Tax codes change every year. It’s complicated for seasoned accounting professionals. The average small business owner is expected, however, to keep up with the tax code changes if they don’t have an accounting professional in their corner to help them plan their tax statements.
Misunderstanding Automobile Deductions
If you have a van dedicated to delivery of your products, it’s simple to deduct 100% of the costs of owning and operating the vehicle. But most small business owners use their cars interchangeably with business and personal needs. A professional can help you understand the difference between standard mileage deductions from business mile deductions.
Tracking Deductible Expenses
Every small business owner does not have the luxury to have a company credit card for business spending and a personal credit card for personal spending. A lot of small business owners, use their credit cards and cash interchangeably for business and personal use. Unfortunately, most fail to keep accurate receipts of spending that was for the purpose of the business versus personal spending.
Record Keeping
Record keeping has been a thorn in the side of small business owner’s probably since the advent of the tax income system. Inappropriate record keeping can lead to audits from the IRS or missing out on deductions that you could have included on your tax returns. Simply saving receipts in an organized $5 file cabinet could save you thousands.
Employees as Contractors
Small businesses do this so they don’t have to pay payroll taxes on them, cover them in their pension plans or provide them with medical insurance. If you’re filing your payroll tax returns and paying payroll taxes on time, you may never get a payroll tax audit. But if you do then you may have payroll taxes due for those people going back three years. It mounts up quickly, and you’ve got interest and penalties due as well. Before you decide to call somebody an independent contractor, you really ought to check with your accountant or tax lawyer and make sure there’s some justification for doing it that way.
Regina H. Rudolph, CPA, PLLC has been serving clients across Mecklenburg County from its University area office since 2004. The firm offers a wide array of services including Consulting, Business and Individual Tax Return Preparation, as well as Audit Services. The staff has a combined 30 years of tax and accounting experience.
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I like your layout as well! Good thing the only thing I own is a website cause I can’t handle all of the tax codes.
This is a very interesting article. Our boutique employment and benefits law practice encounters similar issues with businesses in our areas. These days employers are expected to be experts in every area of law, so as not to run afoul of the ever-changing legal requirements. It is great that there is some easily accessible information on the internet that employers can turn to for basic guidance.