Expert Q & A: 5 Tax Time Tips for Small Business Owners

February 8, 2008 By

One of the biggest challenges every small business owner faces is staying on top of proper tax documentation and meeting al tax filing deadlines. ASB News thanks Steve Hurok, Tax Director at BDO Seidman, LLP, for providing these excellent tax wisdom tips for small business owners.

1.What part of getting ready for tax time seems to stress small business owners out the most?

The task of sorting through a years worth of disorganized documents can be overwhelming – when small business owners keep their documents organized throughout the year, it makes tax time much easier. Additionally, the comingling of business and personal expenses may be one of the biggest factors that lead to stress during tax time.

2.Can you recommend some steps that small business owners should take to reduce their stress at tax time?

Some steps that small business owners should take to avoid stress include:

Keep personal checking and business checking account separate
Review prior year’s return to see the categories of income and expenses.
Only keep receipts and/or documentation of things that prove your income or expenses. You do not need to keep everything.
Start early and make an appointment with your accountant so that they have ample time to sort or find the necessary documents. In other word, avoid “last minute” work so that deductions are not overlooked.

3.Are there any tax deductions that small business owners tend to overlook when tax time rolls around?

A relatively recent deduction that may be missed is the deduction for “domestic production activities.”

4.What advice do you have for entrepreneurs who have trouble keeping track of receipts for business expenses?

Keep separate credit cards for personal and business expenses. This also goes for other personal loans and business loans.
Have a filing system that “mirrors” the tax return.
Include income categories (salaries, commission, interest, rental income, etc.) and expense categories – (consider keeping a separate file for your deductible expenses.)

5.What do small business owners need to be aware of regarding the restrictions on writing off business related car mileage?

Some matters to be considered are:

If you use the standard mileage rate (48.5 cent per mile for 2007) – then you cannot deduct your actual car expenses for that year. (Cannot deduct depreciation, lease payments, maintenance, gasoline, insurance, etc,)
If you own or lease 5 or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car.
You cannot deduct estimates or approximated amounts. You must keep adequate records, such as the date and mileage for each business use, and the business destination.
If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period.
Business related business mileage includes miles you drive for business purposes that are NOT in the course of going from your home to your place of business and back.

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