To most of us, April means tax time and the headaches of making sure we (or our accountant) have all of the information to get our taxes done with a minimal amount of pain and money. I recently spent time with Herb Whitesell, Melissa Shronce and April Keller from local accounting firm Davidson, Holland, Whitesell & Co., PLLC talking about tax issues that small businesses should consider as tax day draws near.
The experts’ first piece of advice is to get organized. You can pay professional accountants to sift through your shoe box of receipts, or you can maintain records throughout the year to make things go smoothly. Whether it be a general ledger, an Excel spreadsheet, or an accounting software program such as Quickbooks or Peachtree, save yourself money and aggravation by getting and staying organized.
Timing is important when it comes to recognizing income and expenses, particularly if you operate on a cash accounting basis. Shronce and Keller point out that you should be careful to make sure you capture income and expenses in the correct period, with a common mistake being credit card charges that occur in December may be incorrectly recognized in January. These expenses should be recognized in December which can reduce recognized income and reduce your tax bill.
Capture all appropriate business expenses in order to reduce taxable income. Driving mileage for business was expensed at 50 cents per mile in 2010, and as long as more than half of a trip is devoted to business you can deduct the travel costs as well as other business-related expenses. And when thinking about your deductions, remember business losses are often overlooked for sole proprietorships or LLCs. Losses can be deducted against a business owner’s personal income tax, and if the business loss exceeds the business owner’s personal income for the year some of the loss can be used to reduce taxable income in future years.
A big part of an accountant’s job is to keep up with changes in the tax code, and Shronce points out that there are potential tax benefits related to employer-provided health insurance. “There are potential tax credits available to businesses with less than 25 employees with average employee salary levels that don’t exceed $50,000,” advises Shronce. “If a business qualifies, you could get up to several thousand dollars in tax credits.” Good reason to check in with your accountant.
When I asked the Davidson, Holland, Whitesell and Co. gang about common mistakes they see, Keller warns that too often business owners are quick to make changes to their general ledger accounts, which impacts historical information. “Businesses must be really careful to not make changes that impact the previous year’s numbers,” says Keller. “They should share changes with us so we can properly complete their tax return.” Adds Whitesell, “Software programs like QuickBooks are great, but sometimes these programs make it too easy to go back and make changes to accounting information. Be careful, whenever you’re making adjustments.”
Tax season is stressful, and small businesses must find the right balance between what they can do themselves and when to rely on their accountant. Proceed carefully, but remember that a good accountant can help you find savings and keep you from making expensive mistakes.
Do you have a business question or topic that would make a good column? Send your ideas or questions to jeff.neuville@b-assistnc.com and share your business experience with others.
Email
Facebook
Google
Twitter
Favorites
More
Advertisement