Filing taxes for your small business requires a thorough understanding of the tax code and tax deductions available to you. You want to avoid common mistakes that could cause trouble, while taking advantage of the deductions that can help save money.
We at Ferguson, Timar & Company have compiled a list of tax mistakes many small business owners tend to make. If you are prepared by understanding what you can and can’t deduct, you will enjoy a better tax preparation process.
Keep Track of Small Expenses
It’s easy to overlook small business expenditures on a day-to-day basis. Catalog and get receipts for all your petty cash purchases, educational classes, client meals, magazine subscriptions and other regular purchases. You may not be able to deduct everything, though, so be sure and consult with your tax advisor to see what can be deducted. It’s smart practice to keep track of everything.
Understand Business Driving Deductions
Ask your tax advisor what driving deductions you can make for your small business. Daily commuting to an office is typically not deductible. However, travels to visit a vendor or customer usually are. Other driving may or may not be something you can deduct, so track all your mileage just in case.
Keep Business and Personal Separate
Be careful when intermingling personal and business bank accounts. If you work from home, understand how you need to set up the work space in order to claim a home office deduction.
Again, it comes down to understanding what is and what isn’t deductible, as well as the percentages you can deduct for certain expenses. Always consult with your tax professional and never exaggerate your costs. This way, you can avoid causing trouble with the IRS.
Track Your Payroll Taxes Accurately
Payroll tax compliance is often confusing and complicated, and the penalties can be severe. Always make sure your payroll taxes are deposited properly. You can also consider outsourcing your payroll services to one of Ferguson, Timar & Company’s payroll processing partners. However you handle your payroll taxes, be diligent in your preparation.
Don’t Fall Behind on Record Keeping
Last but not least, keep your records accurate and up to date. Make it a weekly duty to track expenses, revenue, payroll, tax deductions and accounts payable/receivable. If your records are proper and complete, tax season will be much easier.
If you have any questions about what you can and can’t deduct for your small business or are in need of a professional tax preparer, contact Ferguson, Timar & Company today.