Tax season usually carries a high level of stress and urgency for small business owners. Gathering all the relevant paperwork and considering all possible deductions can be an arduous undertaking. To make the process easier, here are some tips on small business tax preparation that can help you avoid common mistakes.
Keep Business and Personal Finances Separate
To avoid confusion in your tax preparation, maintain separate bank accounts for your personal and business finances. It’s important to have distinct personal and business credit cards as well. If you work from home, have a clearly delineated and separate work space so that you can claim a deduction for your home office. Review the details of your business finances weekly to avoid mistakes. To facilitate your efforts, consider using state-of-the-art software, or hire an accountant.
Claim Appropriate Deductions
Be sure to claim mileage, tolls, parking, gas and oil, and other legitimate driving deductions for business travel. You can’t claim travel from your home to an outside business office, but you can claim round-trip travel from your outside office or home office to business locations. Besides your home office and transportation, keep track of smaller deductible expenses such as insurance, supplies, software, furniture, and equipment.
Comply With Payroll Regulations
Keep an especially close eye on payroll details during tax preparation, as mistakes in this area are common causes of tax penalties for small businesses. To avoid problems, maintain meticulous records, classify your workers properly, and consider hiring a payroll company to assist you with the details.
Don’t Forget Other Obligations
At tax preparation time, avoid fixing your focus on the Internal Revenue Service to the neglect of your other business tax requirements. Besides your debt to the IRS, you have obligations such as property tax, excise tax, self-employment tax, and other local taxes.
For more advice on small business tax preparation, get in touch with Black Wolf Capital Group.
