Top 3 Tax Mistakes

1.    Mixing Business with Personal Finances

Law doesn’t require that you keep business and personal accounts separate, but it sure makes bookkeeping a whole lot easier. Separate accounts will ensure that your financials reflect all relevant activity. Income and expenses may be inaccurately reported or missed entirely when your accounts are commingled, and that could mean penalties and missed deductions for you.  And if you are an LLC or corporation, commingling of your personal and business activity could put you in jeopardy of losing the liability protections these types of organizations provide.

2. Misclassifying Labor

Are you reporting labor correctly? If you’ve reported an employee as an independent contractor, you may owe penalties and interest on the employer share of employment taxes. Ensure your employees are classified correctly with these guidelines from a previous post.

3. Missing Out On Deductions

Good books will ensure that you have everything you need to validate deductions come tax season. I’ve put together some helpful tips for smart spending and tracking expenses (mileage deductions, equipment purchases and strategic spending, but you may want to consult with a tax professional for additional deduction strategies. 

Avoid a Tax Fiasco

The mistakes listed above really boil down to one thing—poor preparation. An organized bookkeeping system will be your best friend come tax season. A little research and consistent practices will take you a long way! And if you are struggling to find time or the proper system to get your books in order, it may be time to call in a professional. Email to learn more. 


3 DOs for Documenting Entertainment Expenses

Happy New Year! 

If you’re like me, you’ve likely identified some ways to improve your business in 2015. If better recordkeeping is on your list of resolutions, I’ve put together a few tips to help you keep things in order.

Entertainment Expenses: Recordkeeping DOs

  1. Keep Receipts - Keep receipts for client/employee lunches, dinners, etc. Entertainment expenses are tax deductible if you have the proper documentation. 
  2. Take Note - Write a note on the receipt that documents what the purchase was for or who you entertained and why. 
  3. Make a Copy – Make a copy or take a photo of your receipts. Receipts fade over time, but you can protect your deductions by scanning or copying your receipts. 

Remember that bank/credit card statements aren’t enough. Your credit card statement or canceled check proves that you paid the money. Your receipts show what you bought.

Need help getting organized for 2015. Let’s hit the books together! Email to learn more. 

Purchasing Equipment

We are ¾ of the way through the fiscal year, and you likely already know where your business will fall on the profit/loss spectrum. Armed with that information, now is the time to explore the variety of ways to increase profits or decrease tax liability (depending upon your business and personal goals). 

In an effort to decrease their tax liability, many business owners opt to purchase new equipment, furniture and/or vehicles for deduction purposes. The concept is relatively simple, but there is certainly more than one way to approach deductions (i.e. deduct the total cost, deduct portions of the purchase over time, etc.)  

Deducting portions of a fixed asset purchase over time (depreciation) may be an appropriate method. Alternatively, many business owners take advantage of the accelerated depreciation opportunity provided by the IRS. Accelerated depreciation allows for greater deductions to be taken in the earlier years of an asset’s life (to include fully depreciating the cost of a fixed asset in the year the item is purchased). This results in an immediate reduction in business profits and ultimately tax liability. 

So what makes sense for your business? Contact David Knab to learn more about simple ways to reduce your tax liability.