Tax Season is Upon Us!Megan Kopp
As an entrepreneur/small business owner, one of the last things you are wanting to think about is getting your financial information gathered to take to your tax preparer. I know, I work with entrepreneurs every day. Following are a couple of tips to keep in mind.
- Do NOT take every piece of information from last year’s business operations and put it in a box and give it to your tax preparer. They are obligated to go through everything and that takes time and you will be billed for that time. A summary of your categorized expenses is sufficient but remember to retain all of your receipts for six years in the event of an audit. There are numerous apps to assist in keeping your records organized. Shoeboxed is one that allows you to scan and organize business receipts (https://www.shoeboxed.com/). Following is a list of the ten best accounting apps for small business owners who HATE bookkeeping: https://www.getapp.com/blog/ten-best-accounting-apps/
- Speaking of audit, the four categories that tend to be reviewed the most are travel expenses, including meals and lodging while away from home; entertainment or recreation that has a business purpose; business gifts; and personal use of car, computer or other equipment. These expenses need to be substantiated with very specific documentation in order to retain the business deduction and not have the IRS disallow it. Proper documentation includes date, place, amount, essential character of expense and purpose of expense. A receipt showing the total of the meal plus tip is not sufficient.
- Reconcile all of your bank accounts and credit card accounts to ensure that all income and expenses are accounted for.
- Don’t forget out of pocket expenses that you paid for while shopping at the local big box store for groceries, those post-it notes and copy paper for the business are allowable business expenses.
- Did you use your personal car for business? Don’t forget to take advantage of the 57.5 cents per mile deduction. For audit purposes, make sure to have a mileage log that notes day traveled, purpose and odometer reading. Commuting miles from your home to office are not deductible.
- Have a home office? The simplified home office deduction may apply to you.
- Don’t attempt to complete your business taxes yourself, this is one area you should not bootstrap. The value of a professional preparing your business taxes is priceless.
Laurie Watje, Student Business Incubator Manager, UNI JPEC