« Important Sales Metrics for Small Business | Main | SXSW Interactive - Technology for Small Business »

Small Business Tax Pitfalls to Avoid

It's that time of year again, when small businesses work furiously to prepare financial reports and tax forms in preparation for filing tax returns. In the rush, even a professional tax preparer can overlook certain deductions and reporting procedures if all the information isn't provided up-front. Small business tax reporting pitfalls generally fall into the category of forgotten credits and deductions, as well as improper form use. The following tips can steer you away from such mistakes.

  • Employee vs Subcontractor: It’s important to classify who works for you correctly in order to avoid an IRS audit and the potential for a resulting large tax bill due to unpaid Social Security and Medicare. Subcontractors typically work self-directed on a per project basis and are paid using form 1099. Employees, on the other hand, work more consistently under specific instruction and are paid using form W-2.
  • Health Care Credit: Small businesses who offer employees health coverage can, under ObamaCare, claim a tax credit, which will reduce the total amount of tax payable.
  • Home Office Deduction: Businesses not operating in an offsite setting can claim office expenses as well as certain travel expenses that are directly related to business. Be careful when claiming this deduction, as the office space in the home must not used for any other purpose other than activities related to the business in order to qualify for this deduction.
  • Bonus Depreciation Deduction: In the year that new assets are purchased, a business can claim a 50% deduction, on top of the normal asset deductions.
  • BitCoin Conversion: You may or may not have used BitCoin for online transactions, but if you have, it needs to be converted into dollars and entered with the rest of your business income and expenditures. The government isn't going to charge or refund anyone using BitCoin, so use the national currency.

Financial services like tax preparation and accounting are only as good as the information they receive from their clients. For any small business, tax audit time is stressful and confusing, a fact that can be changed if proper care is taken with the financial records throughout the year. Preparation is key to successful tax filing.

Our company is dedicated to providing much-needed financial funding to small and middle-sized businesses. Through a simple and quick factoring process, Factor King provides money to businesses based on their assets, so that they can move forward and grow into strong competitors in their fields. Learn how our program can help your business - Apply Now!

Related Articles:
3 Business Tips for Getting Organized This Tax Season
8 Mobile Apps for Small Business
5 Tips for Managing Invoiced Receivable

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>