Caught up in March Madness frenzy? Don’t forget it’s also tax season.
The filing deadline – Monday, April 15 – is just around the corner, and while you can’t escape paying Uncle Sam, don’t pay more than what’s legally required. But because tax laws change every year, knowing what write-offs are allowed can be confusing, to say the least. Some business owners miss perfectly legitimate deductions, while others get creative and take more than they should, resulting in potential headaches down the road.
Here are a few tips:
1. Get organized now
Don’t procrastinate. When you wait until the last minute to pull together the necessary information, it’s more likely that important paperwork will be missing. Start by putting all tax- related documents in one place. I use a transportable file box. Then once everything’s together, organize documents by category. This helps identify in advance what’s missing.
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2. Familiarize yourself with available deductions
There’s no need to become a tax expert, but there’s no excuse for being a novice either. Type “small business tax deductions” into any search engine and a wealth of information appears. Familiarize yourself with what’s available and appropriate for your business.
3. Work with a tax professional
There’s nothing wrong with using online tax preparation software, but as complex as our current tax code is, I strongly advise that a professional review business tax filings before submission. Small businesses often miss available deductions or mistakenly write-off ineligible expenses. One example is the farmer who tried to write off the food and medical care for his toy poodle, misrepresenting the pet as a farm guard dog. Or the professional ballerina who was surprised to learn her tummy tuck wasn’t a deductible expense. If you don’t want to hire a professional tax preparer, you can go directly to the IRS for assistance. The agency provides phone or online assistance, or through tax-payer assistance centers.
Remember: Failing to take advantage of legitimate tax deductions can result in your business being taxed more than it should. Be smart this tax season.