The tax deadline passed a week ago for many businesses – which makes it as good a time as any for a reminder that taxes should be a year-round concern for every business.
Zogby Analytics recently conducted a survey of 400 U.S.-based accountants for online accounting software firm Xero and found two common mistakes: One in five small businesses talk to their accountant only at tax time, and one in four don’t have ongoing insight into their financials.
Meeting regularly with your accountant will give you insight into your business and keep you up to date on important tax changes, like the expiration of the payroll tax break and new healthcare taxes for high-income taxpayers on Medicare and net investment income.
Excessive deductions relative to income and mislabeling employees and contract workers are common mistakes that could lead to audits, according to the survey. Mixing business and personal expenses is another common mistake that could trigger an audit, so be careful not to deduct family vacations, for example.
But be sure to take all the deductions you’re entitled to. A surprising number of small businesses don’t deduct out-of-pocket expenses (34 percent), depreciation (20 percent) and car expenses (14 percent).
Mobile apps for smartphones could help you capture and log receipts seconds after you complete a transaction, which could be an easy way to capture all the incidental deductions you’re missing. And if you aren’t using small business accounting software or an online service, it can be a great way to maintain ongoing insight into your operations.