While you’re being inspired by some of the sharpest minds in small business, take a timeout to tap into the expertise of American Express OPEN.
It’s never too late for small business owners to start developing good tax habits. In fact, one of the best times to revise the way you plan for taxes is tax season, when opportunities for improvements are fresh in your mind.
These tips can help you improve your tax preparation:
Pay your tax bill on time
An extension on the filing of your tax return is not an extension to pay your bill; it is only an extension to supply required forms and documentation. Your company will start accruing late charges as soon as your tax payment is overdue. You can hold on to your cash longer and still meet important deadlines by filing your return and paying any amounts owed electronically.
Don’t rely on memory
Tax preparers say that people who rely on their memory to estimate expenses almost always underestimate the actual amount. Whether it’s bridge tolls or lunch for the office, record expenses as they occur. “Old school” systems, such as expandable folders with sides to keep receipts from falling out, come highly recommended from tax preparers. Also consider making as many expenses as possible on credit and charge cards; their statements simplify tracking and documenting expenses.
Ed Slott, author, speaker and founder of the accounting and business advisory firm Ed Slott & Co., recommends recording all tax expenses daily or weekly. The IRS accepts expenses that may sound outrageous, as long as you have records proving their importance to your business. “I had a salesman who entertained clients on a rented yacht on a regular basis,” explains Slott. “Because he had the paperwork to show who he entertained and what they bought from him, the expenses fell under approved IRS guidelines.”?
Remember overlooked expenses
The key to minimizing your tax liability can be to take all possible legitimate business deductions. Remember commonly overlooked deductions such as local business travel (buses, trains, parking meters and garages) and fees for professional associations (including subscriptions and events). Ask your tax preparer about deducting business expenses at one time. For example, Section 179 of the tax code lets you deduct up to $250,000 of business equipment at one time for 2008 or 2009. Also work closely with your tax preparer. For example, Ed Slott points out that many business owners don’t know that if you travel over a weekend for a business trip to get a better fare, the cost of the entire trip is deductible.?
OPEN Tip: Having a charge card on hand can be useful at tax time because your purchase capacity can evolve with your business. Plus, you won’t have to worry about accruing late fees with the IRS if you use a charge or credit card to pay your bill by April 15th.
Simplify record keeping and start keeping track of business expenses with The Gold Card from American Express OPEN. Apply now and we’ll waive the annual fee for the first year, a savings of $125.
The information in this article is intended as a reference tool. You should consult with your tax advisor as well. Time invested in tax planning and preparation can pay off in business savings and improved systems that can serve your company this year and in the tax seasons to come.
Photo - OPEN Cardmember David Lomakin, Regency Air LLC, Santa Ana, CA Member Since: 1997