With just a bit more than two weeks left until the tax reporting deadline, many small business owners seem to find tax filing trip-wires that they can avoid. Moreover, there are some pretty routine reporting errors that seem to be quite common. Arm yourself with the information that could help you save money, avoid having to file an amended return, and still pay your fair share.
There are many, many deductions that could be taken that are overlooked, especially by the solopreneur, or very small business. If you are a speaker, author, coach, advisor or any other type of one-person business, your deductions could be greatly impacted by keeping better records. The same goes for companies like plumbers, electricians and one-person businesses.
The problems we typically see are the lack of receipts to back up the expenses taken, no mileage record for the use of their personal vehicle for business, travel and entertainment, tolls and parking costs, casual labor, or not accounting for payroll taxes, withholdings, etc.
Home Office Deductions
With today’s economy dependent upon the ever-rising entrepreneurial endeavors and less on corporations and large business employment, those working from home often minimize or overstate the home office deductions.
People such as realtors, authors, tech consultants or any other career that allows for working from one’s home can be seen as a boon to one’s freedom. The ease of working (no commute, no getting dressed for the office, take care of the kids and pets), and overall lifestyle while earning is often taken too literally, and tax deductions go willy-nilly. Not everything can be deducted. Conversely, deducting all one is entitled to can be just as difficult. It’s wise to speak to a professional that is savvy on the rules and regulations of working from home, and the tax requirements.
Here’s a quick example that comes to mind. Sally works from home as a sales rep. Sally also has a dog. Sally takes the dog’s vet bills, food, treats, and the time it takes to walk and exercise the dog as a “legitimate?” deduction because the dog serves as security. Good luck with that one.
The Investor’s Conundrum
Tax time brings out the strangest thought processes in some people. We at Bond Andiola have witnessed quite a few daring individuals who think they “can get one over on Uncle Sam,” while others are so timid about their tax liability that they intentionally avoid taking some fair deductions. The tax code is designed for taking it at its literal self, so why not play exactly by the rules established?
Those who hold investment portfolios are not immune to tax filing thoughts and ideas.
An end of year article from Barrons that sums up what can run through someone’s head at tax time:
Investors sometimes lose sight of the forest for the trees. It’s vital to strike the right balance between tax optimization and overall returns. Take the old cliché of holding on too long to equity winners. A stock that has run up 50% or more might be a good candidate for taking some profits (though it all depends on what type of company and what business—an early-stage biotech name may still have many more multiples in front of it). Not taking profits in the fall of a calendar year in order to avoid paying taxes on the gain only makes sense if the investor has a high conviction that the name won’t decline in the months ahead.
Regardless of your income, salary, investment portfolio or checking account level, we are all equal under the law. And, the tax law is no different. If you have been putting off tax filing until this last minute, there is still time to do the right thing (though at this point it will be on extension). Here at Bond Andiola, we can find a way to counsel you on what tax questions you might have. Heck, if it’s at all possible, we might just find time to lend a hand.