With April 15 just weeks away, small business owners like you are looking for ways to keep your taxes down, file correctly and steer clear of audits. The Small Business Administration, a part of the federal government that helps and protects the interests of small businesses, offers no shortage of information on their website (sba.gov) on this an similar topics.
Following are some tax tips from the SBA to help you during 2015 and beyond:
- Keep Good Records and Understand Available Deductions
Proper record-keeping year-round is the first step to ensure taxes are filed accurately. Save essential paperwork that could be needed to back-up deduction claims, should there be an audit. Keep it in mind that tax credits and deductions change each year.
- Utilize the Small Business Jobs Act Tax Provisions
The Small Business Jobs Act of 2010, signed into law by President Obama, has over 17 tax provisions to decrease tax burdens for small businesses. Utilizing these provisions could provide great savings for your business.
- Remember the tax credits within the Affordable Care Act
These tax credits will allow small businesses to cover up to 50 percent of the health care premiums a small business pays to cover its workers.
- Avoid Common Audit Traps
It is very important to be aware of potential red flags that could include:
- Classifying Employees as Independent Contractors – Independent contractors and employees are not the same and it is important to understand the difference. In the eyes of the IRS, misclassification can be seen as an attempt to avoid payroll taxes; non-compliance can bring penalties and back taxes.
- Home Office Deduction – This deduction is very specific and not all home-based businesses qualify. Know how to determine if you are eligible to claim this deduction and what specific expenses may be deducted.
- Large Sum Miscellaneous Deductions – If you claim a large amount of itemized deductions or miscellaneous expenses, relative to your income, the IRS could get suspicious. Be specific and label every deduction.
- Keep Business and Personal Expenses Separate
The IRS scrutinizes personal expenses that may have been claimed as a business expense, such as the use of a business vehicle for personal use. Maintain separate bank and credit card accounts for your business and personal use. Be diligent about keeping good records.
Of course this is just a quick list of things to keep in mind. For more information, visit the IRS website at irs.gov or contact a tax professional.