Tax season is here, and as you go through your 2013 returns and prepare forms for the IRS, keep these tips in mind for both this year and next year. Here are some tips to avoid tax mistakes that entrepreneurs commonly make.
1. Keep Records
Hold onto all evidence of your company’s income and expenses—including receipts and cancelled checks. You should hold onto these records until three years after the filing date or two years after the date the tax was paid. This will make things easier if you run into financial complications that require proof of income or expense. Keep everything organized! All those records can really add up, so make sure everything is labelled and organized neatly so they will be easy to find, should the situation arise.
2. Keep Personal and Business Expenses Separate
A business expense must be an ordinary and necessary one in order for it to be tax-deductible. The IRS pays especially close attention to these kinds of business deductions: home office, automobile, and travel or entertainment. Don’t try to sneak personal expenses into the list of tax-deductible business expenses. A good way of making sure that personal and business expenses don’t get mixed is keeping separate credit cards and bank accounts.
3. Double-Check the Return
Read over your returns as carefully as possible. The most common mistakes on tax returns include incorrect Social Security numbers, mathematical mistakes, misspellings, and numbers entered on incorrect lines. Take the time to look over the return—the extra time you spend will be worth it.
4. Don’t Hesitate to Hire Help
Your small business tax returns will likely be more extensive and complicated than your personal tax returns. Using TurboTax might not be enough, especially if you make a mistake and get into trouble. It can be a huge help to have a CPA help you file your tax returns and make sure there are no errors.