We all know that tax season is in full swing. If you are pulling hair out searching under the living room sofa for that receipt from 7 months ago you may want to read the ITC three suggestions for home business taxes …
1. Whenever you buy anything for the business make sure you keep the receipt.
Of course this one is a no-brainer. If you are ever audited by the IRS it will relieve a lot of stress when you can prove all of your expenses for the year and through the years. There is an easy way to do this. Get yourself a credit card / debit card specifically for the business. Participate in the online banking for that credit card / debit card. All the major credit card companies keep track of all of the card purchases for you in online accounts. They basically do your record keeping for you! When tax time comes around you can just print out the records which makes for super easy record keeping!
2. Track all income generated as it comes thru the door.
You have plenty to do just to keep a startup business IN business. You will not be a happy camper if you have to manually add up all the paper invoices come March and April. Save yourself the headache and track the income when it comes through the door. It can be as simple as an Excel spreadsheet, or a little more involved with software like Quicken. If you have those total income numbers ready to go, tax time is a much less stressful time.
3. Get yourself a real life tax friend.
Having a friend you can chat about tax deductions with is a real asset. For example, if you are using your home as an office, you can possibly deduct repairs made around the house, the utilities bill, your home’s overall equity at the time of business startup, and much more. Yes, that accountant friend whom you rolled your eyes at whenever he talked about tax brackets has now become your walking human discount coupon. Ask him or her a lot of questions, buy them lunch, wash their car, and treat them like royalty because they can save you thousands by pointing out what you can write off or what you SHOULD be doing to earn that write off next year.
Sooo what happens if you don’t keep proper records?
Individuals with small businesses are the most likely group to have their tax returns audited and reviewed by the IRS. If you don’t have a receipt for something you deducted, you will likely lose the deduction and owe the IRS money. It’s hard enough making money. Do you really want to have to give it back to Uncle Sam because you couldn’t prove to him that you really did spend $5000 last year on fuel for business meetings? Of course not. Did you even know your could write off fuel for business meetings? That’s why you need that tax friend! Combine your friend with the tips from the Income Tax Crew and you are a small business tax genius!