If you own a business, you'll want to be sure that your tax return is flawless. Even a minor mistake on your business' return can cause delays in processing. So read on to find out how to avoid the most common errors.
Keep good records
The general rule is to keep receipts, bills paid, canceled checks, accounting ledgers, and other financial documents for three years. Some records such as property records should be kept indefinitely. Check with your tax advisor before you pitch any important papers.
Get good advice
If you're going to pay someone to do your taxes, be sure to choose someone you can trust. Ask business associates for recommendations and look for a tax professional that has experience in your industry.
Give wisely
Keep track of all of your donations to charity, as many of these contributions are tax deductible. Remember, though, if you give more than $250 to one charity, you'll need written documentation from the organization; cancelled checks do not provide enough proof of donation.
W-2s
As a business owner you are responsible for furnishing your employees with accurately calculated W–2 forms, typically by January 31st. Include wages earned and amount withheld.
Avoid common mistakes
Your tax refund will be in the mail much sooner if you avoid common errors like incorrect or missing employer identification numbers, forgetting your signature, mathematical miscalculations, and checking inappropriate exemption boxes.
Educate yourself
Taxes can be very confusing; if you don't understand a certain tax code or term clarify the definition. (See a list of H&R Block tax definitions or talk to your tax advisor.) Also remember that the tax laws change fairly often and may be different from the last time you filed a return. Check with your tax advisor to get important updates.
Deductions
If you feel you're paying more in taxes than you should, consider consulting a tax professional who can tell you whether or not you're taking advantages of all of the deductions available to you. For example, your electric, water, and gas bills are typically deductible, so are gifts to clients or employees (up to $25 per person under current laws), and some subscriptions to professional publications. See a list of 25 common business deductions and expenses from American Express.
Set up a retirement fund
Save for the future and reduce your tax burden. Under current tax laws, you can deduct contributions made to IRA, SEP, and Keogh accounts; the earnings are tax–deferred until you begin making withdrawals. Consult your financial advisor for information specific to your needs.
Take advantage of business losses
In general, if your business expenses exceed your revenue you can deduct your losses. Check with your tax advisor for more information.
Help is available
If you have an unresolved tax issue, the IRS has a Taxpayer Advocate Service specifically established to settle tax problems fairly, protect taxpayers' rights, and reduce the tax burden. Each state has advocates that report directly to the national program.
