10 Most Expensive Tax Mistakes
That Cost Business Owners Money
1.Failing to Plan. We will explain to you how to use and control taxable income, adjustments to income, deductions/exemptions, tax brackets, tax credits, pre-tax dollars, after-tax dollars, and ways to cut your taxes.
2.Audit Paranoia. Tax planning does not mean higher odds of being audited.
3.Wrong Business Entity. Choosing the wrong business entity can cost you money. Choosing the correct business entity involves numerous tax considerations. What worked in the beginning may not work in your best interest now. You should have this reviewed annually with your tax advisor.
4.Wrong Retirement Plan. Your financial advisor should know what is best for your future and your budget. However, you should always talk to your tax advisor and make sure it makes sense for your individual tax status.
5.Missing Family Employment. Hiring your children and grandchildren can be a great way to cut taxes on your income by shifting it to someone who pays less. There are several determining factors to be considered. Call us for an in person meeting on how this can help you and them.
6.Missing Medical Benefits. Surveys used to show that taxes used to be small business owners' biggest concern. Now it is rising health care costs. If you pay for your own health insurance, you may be able to deduct it as an adjustment to income on Page 1 of Form 1040. If you itemize deductions, you can deduct unreimbursed medical and dental expenses on Schedule A, if they total more than 7.5% of your adjusted gross income. Call us to learn how to write off medical bills as a business expenses? We can show you how.
7.Missing Office At Home. The home office deduction is probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared it raised an automatic audit flag. Congress has relaxed these rules, so now it is far less likely to attract attention. Your home office qualifies as your principal place of business if: 1) you use it exclusively and regularly for administrative or management activities of your trade or business; and 2) you have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Form 8829 is used to compute home office expenses for a sole proprietor. If you are taxed as a partnership or corporation, there is no separate form, which helps you "fly under the radar."
8.Missing Car & Truck Expenses. This deduction is the same for everyone, no matter what we drive. Do you think we all spend the same to operate our cars? It might surprise you to see how much it really costs to operate your car. And it is not exactly 55 cents per mile! If you are taking the standard deduction now, you can switch to the "actual expense" method if you own your car. You can not switch from actual expenses to the mileage allowance if you have taken accelerated depreciation.
9.Missing Meals and Entertainment. The basic rule states that you can deduct the cost for meals with a bonafide business purpose. This means clients, prospects, referral sources, and business colleagues. The general rule is that you can deduct 50% of your meals and entertainment, so long as it is not "lavish or extraordinary." Keep in mind that you should always keep your receipts and write the person's name and purpose on it. Contact us for more information on the meal and entertainment deduction.
10.Missing Tax Coaching Service. Now that you have seen how business owners miss out on tax breaks, let's discuss the biggest mistake of all, the failure to plan. Have you all heard the saying "if you fail to plan, you plan to fail?" It is a cliche because it is true. Fortunately, our tax coaching service avoids the problem. We offer true tax planning. We will tell you what to do, when to do it, and how to do it. Then we prepare a written tax plan that addresses your family, home, job, business, and investments. We will even review your last three years' tax returns to see if we can find savings you overlooked. If you are serious about the strategies you have read here, then why not call us now and give us a chance to earn your business.