4 Tax Accounting Tips for Small Business Owners

July 16th, 2013 by

Filing taxes can be a daunting experience for many small business owners. According to the National Small Business Association, 64 percent of business owners spent more than 40 hours per week preparing federal taxes in 2012 often spending more than $5,000 before their tax forms were completed and filed. These few simple tricks could help expedite the process of filing for your business in the coming year.

Keep a Daily Log of Your Expenses

To help you or your tax accountant work more quickly through the filing process it is important to maintain clear and detailed records of your expenses. Keeping a daily log, though it may seem time consuming at first, will help you to identify all legitimate business costs. Quickbooks is an excellent resource to keep track of all your yearly expenses. The online tool (available here) allows small business owners to easily create Excel expense reports from any device containing all expense and receipt images.

Take Advantage of Common Deductions

Deductions are a simple concept: the more legitimate deductions a business can take, the lower the taxable profit will be. This being said, come tax time, many small business owners overlook easy deductions. Among the most common of these deductions are entertainment, travel, meals, home office and health insurance expenses. In order to take advantage of these deductions, small business owners must keep detailed daily records of their spending on these items. You may do well to research other commonly-missed deductions.

Know the Rules Concerning Payroll Taxes

One of the most common, and costly, tax-related issues that small businesses come up against is using the payroll taxes withheld from employees to finance business operations. The Trust Fund Recovery Penalty (TRFP) is a mechanism used by the IRS to recover back payroll taxes. This is known as a trust fund tax because the money was collected on behalf of the IRS and was supposed to be turned over to the government. The government views this as their money, and failure to repay it is like robbery. Often the IRS will attempt to assess serious penalties in addition to attacking the owner’s personal assets to collect unpaid payroll taxes.

Talk to a Professional Tax Accountant

Avoiding the many pitfalls small business owners run into during tax time can be easily done by hiring a tax accountant to consult. Having someone who knows the tax laws can greatly cut down on the stress of filing. It can also translate into money saved for your business. Creating a relationship with a tax professional will not only insure that you have a resource to call year-round, but will also keep your taxes on track throughout the year.